Explain why the following are examples of monopolistic competition.
a) There are a number of fast-food restaurants in town, and they compete fiercely. Some restaurants cook their hamburgers over open flames. Others fry their hamburgers. In addition, some serve broiled fish sandwiches, while others serve fried fish sandwiches. A few serve ice cream cones for dessert, while others offer frozen ice cream pies.
b) There are a vast number of colleges and universities across the country. Each competes for top students. All offer similar courses and programs, but some have better programs in business, while others have stronger programs in the arts and humanities. Still others are academically stronger in the sciences.

Question

11-08-2020
Business

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Explain why the following are examples of monopolistic competition.
a) There are a number of fast-food restaurants in town, and they compete fiercely. Some restaurants cook their hamburgers over open flames. Others fry their hamburgers. In addition, some serve broiled fish sandwiches, while others serve fried fish sandwiches. A few serve ice cream cones for dessert, while others offer frozen ice cream pies.
b) There are a vast number of colleges and universities across the country. Each competes for top students. All offer similar courses and programs, but some have better programs in business, while others have stronger programs in the arts and humanities. Still others are academically stronger in the sciences.

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michell96 michell96 · Answer 1 · 2020-08-12T17:07:42+02:00

Answer: In both situations, several companies are offering similar but not identical products, which means there is an imperfect competition.

Explanation:

In businesses, monopolistic competition occurs if different businesses offer differentiated products. This means that even when products are similar they have unique characteristics that cause one product cannot replace others. This occurs in the two examples presented because features such as different methods to cook hamburgers, or products such as fish sandwiches or ice cones in the first example make each of the restaurants to have differentiated products. This also applies to the second example, as some colleges are better in business, others in arts, others in science, etc.

Moreover, in monopolistic competition, there is imperfect competition because due to the differences in products the product of one business cannot directly compete or replace the products of another. Also, this causes the prices can be increased.