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10 March, 14:03

Determine whether the markets, businesses, or products listed below belong in a competitive market, a monopoly, or a monopolistically competitive market.

(a) American Eagle

(b) Burger King

(c) Merck's cholesterol-fighting drug

(d) your local electric company

(e) the stock market

(f) a farmer who grows corn

Categories:

(1) Monopoly

(2) Monopolistic comp.

(3) Competitive market

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Answers (1)
  1. 10 March, 17:49
    0
    The correct answers are:

    A - 2

    B - 2

    C - 2

    D - 1

    E - 3

    F - 3

    Explanation:

    A) _ American Eagle belongs to a monopolistically competitive market due to the fact that as being a lifestyle clothing with its own famous brand, there are plenty others that provide the same good to the clients but with the little differences that make each product more less the same and that encourages the use of very strong publicity campaigns.

    B) _ Burker King belongs to a monopolistically competitive market due to the fact that as being a fast food chain restaurant, there are plenty others that provide the same service or product but in a different way or with little differences that make the product more unique in the eyes of the consumers, making the publicity and the brand name very important in this market.

    C) _ Merck's cholesterol-fighting drug belongs to a monopolistically competitive market due to the fact that there are many other farmaceutic companies that sell the same drug but the main difference is in the brand of the company and how that name gives security to the clients that later translate into loyalty from them.

    E) _ The stock market belongs to a competitive market due to the fact that there are plenty of sellers and buyers and they can not influence in the price due to the big number and also because an unique product is sold, an stock, and every company can sell a stock.

    F) _ A farmer who grows corn belongs to a competitive market due to the fact that his product is a very common good sell by many other ones and because of that he can not establish a price that he would want but instead he has to accept the price that the market gives.

    D) _ The local electricity market belongs to a monopoly market due to the fact that many companies that provides the fundamental services of living, such as electricity are provided by the government or by a unique agency with the final purpose of not focusing in the profit but instead focusing primaraly in the social benefit of the community.
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