Question

Need immediate help

The Starfire Coffee chain was the only coffee-shop chain and meeting place in many American cities for more than 12 years. People paid $5 for a mug of peppermint coffee and the experience of sitting in front of a roaring fire, chatting with friends.

Twelve years after Starfire's appearance, a similar coffee-shop chain, Reindeer Brews, entered the marketplace. Reindeer charges $3 for a mug of hot cocoa and a similar community experience.

How would you characterize this scenario?

Non-price competition in a monopolistic market

Non-price competition in a purely competitive market

Price competition in a monopolistically competitive market

Price competition in a purely competitive market

Answer 1

Price competition in a monopolistically competitive market

Step-by-step explanation:

Monopolistic competition is a competition model in which two or more companies compete in the same market and offer similar but not exactly the same products. These products compete for differentiation and price. This is the case in which Starfire Coffee sells mint coffee for $ 5 and Reindeer Brews enters the market and competes with Starfire by selling mint chocolate, a similar product, for a competitive price of $ 3.

Answer 2

#1) How would you characterize this scenario?

Answer: After reading the Scenario presented above I can conclude that the best way to characterize this scenario is Price competition in a monopoly market. The reason being that both places offer a similar service but there is differentiation in design, service, and probably quality.

I hope it helps, Regards.