Final answer:
The result of retailers offering merchandise not typically associated with their type of store is inter-type competition, which increases competition among retailers selling similar merchandise using different types of retail outlets. This is known as monopolistic competition, where retailers compete by offering distinctive product varieties that cater to different consumer preferences.
Step-by-step explanation:
When retailers offer merchandise not typically associated with their type of store, such as clothing in a drugstore, the result is inter-type competition which increases competition among retailers that sell similar merchandise using different types of retail outlets such as drug and department stores.
One type of imperfectly competitive market that arises from this scenario is monopolistic competition. Monopolistically competitive markets feature a large number of competing firms, but the products they sell are not identical. This means that retailers engaging in this type of competition are offering distinctive product varieties that cater to different consumer preferences.
For example, when a drugstore sells clothing, it is entering the clothing market and competing with other retailers in that industry. This competition increases choice for consumers and forces retailers to continuously innovate and differentiate their products in order to attract customers.