In recent years, consumers have been less willing to buy packaged foods that contain gluten or high levels of fat and salt or soft drinks containing sugar. Firms such as General Mills, Kellogg, and Coca-Cola have responded by modifying many of their products by, for example, making them gluten-free and eliminating or reducing salt, sugar, and artificial flavors and colors. General Mills Chief Executive Officer Ken Powell explained, “The reality of the changing food values of our consumers is central to what we’re doing.” Monopolistically competitive firms do not achieve productive efficiency or allocative efficiency, but economists argue that consumers benefit when these firms differentiate their products to appeal to consumers. Briefly explain how the actions taken by General Mills and other food and beverage firms may benefit their consumers.
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