Final answer:
The intense rivalry among fast-food chains like McDonald's, Wendy's, and Burger King stems from the continuous effort to differentiate their products in a market with many similar offerings and the threat of new entrants, which is characteristic of monopolistic competition.
Step-by-step explanation:
The rivalry among McDonald's, Wendy's, and Burger King is intense because these companies operate in a market characterized by monopolistic competition, where products are highly similar but differentiated through branding and slight variations. In such markets, product differentiation plays a crucial role. Firms constantly attempt to differentiate their offerings with unique features, such as special sauces or meal combos, to gain a competitive edge. Additionally, when a company in monopolistic competition earns positive economic profits, it attracts new entrants, intensifying rivalry. Furthermore, the growth of brand recognition requires significant investment in advertising and marketing, leading to high barriers to entry and the potential for an oligopolistic market structure, which can further fuel competition among established firms.