Question

Chapter 12 and 13 looked at perfectly competitive and monopolistic competitive markets. Give an example of a business or company that fits into each market structure, and explain how they fit into the market structure referring back to the three criteria we examined in the beginning of chapter 12. You can NOT use any companies/businesses from the book.

The 3 criteria are: many buyers and many sellers, all firms must sell identical products, no barriers to new firms entering the market

Answer 1

Internet service providers are an example of perfect competition where there is a large number of buyers and sellers (for instance in India there are 326 providers and to name a few BSNL, Reliance, Airtel, and Tata telecom)along with no barriers to entry and exit. They all provide the same service or good to the customers (internet). Another example can be of the agricultural markets or the local farmers market where all farmers sell their produce. There is a large number of farmers and buyers who come to sell and buy the product. The farmers sell homogenous goods (vegetables, fruits)and there are no restrictions in the entry or exit to the local market for the farmers. The local fish market is also an example of perfect competition.

Examples for monopolistic will revolve around clothing industries or even customer service industries like restaurants and pubs. Again each has a large number of buyers and sellers along with low barriers to entry and exit. The products are slightly differentiated but are very close substitutes hence high investment on non-price competition like sales promotion and advertising. For instance, we will see ads for sale or discount in the newspapers or even social media this is done to induce product differentiation. Example -Pizza hut and  Dominos(along with many other firms) all cater predominantly pizzas but due to the competition induces in advertising.