Product differentiation

Question:

Any large grocery store carries at least seven different kinds of corn chips–baked, fried, salsa-flavored, white, yellow, blue, and lime-flavored.

1. When is product differentiation real and when is it an illusion?
2. Is there an objective universal answer to a?
3. Are there any individually objective answers to a and b?
4. Does your answer to c tell you anything about the economic implication of the benefit of markets? (Hint: Is the assumption of rational consumers with well-ordered preference functions necessary to the argument)?

Solution: