Question

Determine whether certain products are likely sold in a monopoly, perfectly competitive or monopolistically competitive markets.

a. There are a small number of producers of deodorant. Each firm's products are slightly different. For example, some are lavender scented, while others are citrus scented. Would you expect that the market for deodorant is a monopoly, perfectly competitive or monopolistically competitive? Why?
b. There are many producers of soybeans, and each farmer's soybeans are indistinguishable from his or her neighbor's soybeans. Would you expect that the market for soybeans is a monopoly, perfectly competitive or monopolistically competitive? Why?
c. There are many producers of roasted coffee beans, and each roaster has its own special roasting technique. Coffee beans purchased from one roaster are noticeably different from beans purchased from another roaster. Would you expect that the market for roasted coffee beans is a monopoly, perfectly competitive or monopolistically competitive? Why?
d. There is a sole firm providing power in Tampa Florida. The firms price is regulated by the government. Would you expect that the firm providing power in Tampa is a monopoly, perfectly competitive or monopolistically competitive? Why?

Answer 1

monopolistically competitive

a monopolistically competitive is characterised by differentiated goods. A monopoly has only one seller. So, the market for deodorants is not a monopoly because there are plenty sellers

perfectly competitive industry sells homogenous products. The deodorants differ by smell. Thus it is not a perfect competition

b. Perfect competition

there are many sellers and the goods sold are homogenous

c. monopolistically competitive

the coffee beams are differentiated and there are many sellers

d. monopoly

there is only one seller

Step-by-step explanation:

A perfect competition is characterized by many buyers and sellers of homogenous goods and services. Market prices are set by the forces of demand and supply. There are no barriers to entry or exit of firms into the industry.

In the long run, firms earn zero economic profit. If in the short run firms are earning economic profit, in the long run firms would enter into the industry. This would drive economic profit to zero.

Also, if in the short run, firms are earning economic loss, in the long run, firms would exit the industry until economic profit falls to zero.

A monopolistic competition is when there are many firms selling differentiated products in an industry. A monopoly has characteristics of both a monopoly and a perfect competition. the demand curve is downward sloping. it sets the price for its goods and services.

An example of monopolistic competition are restaurants

A monopoly is when there is only one firm operating in an industry. there are usually high barriers to entry of firms. the demand curve is downward sloping. it sets the price for its goods and services.

An example of a monopoly is a utility company