Chapter 14, Problem 1SPA

To determine

Identify the items which are sold by the firms in monopolistic competition.

Explanation of Solution

Monopolistic competition is an imperfect market situation, wherein, many sellers produce differentiated products. Hence, the products have not perfect substitutes.

In the cable television service market, there are less number of firms and the service provided by these firms are mostly homogenous. Thus, it cannot be considered as monopolistic competition.

The wheat market is selling homogenous goods (Wheat). Thus, it is not a monopolistic competition.

Differentiated goods exist in the shoe industry. Shoes differ in the quality, quality, shape and features. Thus, these good are sold in a monopolistic competitive market.

Since there is less number of firms existing in the soda market, it cannot be considered to be under monopolistic competition.

A lot number of firms produce different types of tooth brushes. Since these are differentiated goods, these good are sold in the monopolistic market.

Ready mix concrete is a homogenous good. Thus, it is not a monopolistic competitive.

In short, out of the given items, only items in the shoe market and toothbrush industry are considered examples under monopolistic competition.

Economics Concept Introduction

Monopolistic competition: Monopolistic competition is an imperfect market structure which has a relatively large number of buyers and sellers in the market, differentiated products, some control over the market price and a few barriers of entry and exit.