Question

Think about businesses that you interact with on a daily basis. Pick two specifically and decide whether these businesses operate in a market that is perfectly competitive, monopolistic, monopolistically competitive, or oligopolistic. Explain why you classified the business in this way. Which category do you think most businesses we interact with on a daily basis fall under?

Answer 1

1) the first business that I want to consider is a fruit seller because usually I buy fruits and this is a perfectly competitive market because all the fruits are identical and the price of every story is same because the price is determined by the market demand and supply levels and there are no barriers to enter into the business and the cost of entry is very low and there are huge number of fruits sellers in the city and all these make sense for a perfectly competitive market.

2) the second business I usually consider is a restaurant where I usually eat and this is a monopolistic competition because it satisfies all the conditions of monopolistic competition such as the differentiated product where the taste is different from that of other restaurant and the barriers to entry are low where even I can open a restaurant and there are many restaurants across the city

Usually on a daily basis, most of the businesses that we encounter are monopolistic competition because everyone tries to gain profits try to differentiate their product or service levels mostly right from a necessity seller to high end product seller.