What you’ll learn to do: explain the characteristics of monopolistic competition and how it differs from other market structures
Monopolistically competitive industries are those that contain more than a few firms, each of which offers a similar but not identical product. Take fast food, for example. The fast food market is quite competitive, and yet each firm has a monopoly in its own product. Some customers have a preference for McDonald’s over Burger King. Some have a preference for Dominoes over Pizza Hut. These preferences give monopolistically competitive firms market power, which they can exploit to earn positive economic profits.
Consider the following questions:
- Why do gas stations charge different prices for a gallon of gasoline?
- What determines how far apart the prices of Colgate and Crest toothpaste can be?
- Why did fast food restaurants start offering salads?
- Why are fast food chicken sandwich prices different from burger prices?
- Why did McDonalds come up with the Big Mac sandwich?
- Authored by: Steven Greenlaw and Lumen Learning. License: CC BY: Attribution
- Fast Food is the best. Authored by: ebruli. Provided by: Flickr. Located at: https://www.flickr.com/photos/mrbling/42711932/in/photolist-4LULC-cGwaPU-aCpjG1-7HvXFk-bk44T8-e7f6bp-pbaqmL-eQnMvd-ecGwf4-7HzSWG-6G7wk3-di6ztC-8Wd4oT-Cqq6y-fEsR1K-rcE8tQ-6M9WPf-o87PN-2BZze-6KQj8x-rcGkMy-bC473f-8fjV72-fEKGVW-9nRf3Y-8vYFBf-pKeANE-6NzxzZ-5ryBYV-6K5nSZ-rScFJX-6KPRTG-6F6SF1-rgam52-7HzSPE-8Wgtd-636RVh-dfuafd-pdM61f-6F2HWB-AmEYe-8D7Axw-omhMvn-6UAgFP-7K7eCz-b3vqyM-ksapsv-bR5dbD-9ZaA1-7HzT55. License: CC BY: Attribution