Final answer:
Retailers with multiple units pose a stronger competitive threat because they can offer lower prices and diverse products, making them more attractive to consumers in a monopolistically competitive market.
Step-by-step explanation:
Retailers with several units are a stronger competitive threat because they can leverage economies of scale, have a greater market presence, and the ability to diversify their offerings to attract a wider range of consumers. In a monopolistically competitive market, where many firms compete with differentiated products, the presence of retailers with several units becomes significant. Such retailers can spread out their costs over a larger number of stores, often resulting in lower prices and improved efficiency. They can offer a variety of goods and services, such as a gas station offering coffee and a carwash to lure customers, similar to how a restaurant might use a unique barbecue sauce to stand out. These strategies put pressure on small, single-unit retailers, as customers benefit from the wider selection and typically lower prices provided by larger competitors.