The correct answer was d. I chose answer c. The chapter emphasizes how competitive firms will accentuate their product differences to make the consumer value their product more than their rival's product. In the long run firms in this industry tend to earn a normal profit. One of the ways that firms differentiate their products is to spend money on their products, i.e., called selling costs or production costs.
Production costs occur when firms spend money to try to adapt the product to the buyers.
Look at all of the small sub shops, the hamburger establishments, the pizza parlors of all kinds of different sizes, and the multitude of Japanese fast-food restaurants. I find it curious that the book mentions that the majority of output is produced by oligopolies. I would like to know which these are, and how long they have been in existence. If this is really the case I think that primarily government regulation is responsible for this limited number of companies. The chapter mentions concentration ratios and contestable entry under oligopolies.