Question

Product differentiation in monopolistic competition Consider two sandwich shops owned by the same firm. Both shops offer the exact same menu, so the sandwich quality is identical. One shop is located in an upscale downtown area. The other shop is located in a strip mall in the suburbs. The interior of the downtown shop includes leather booths, oak tables, and plasma televisions. The interior of the suburban shop is more modest, with plastic tables and folding chairs. Sandwich prices are considerably higher at the downtown shop Product differentiation between the two sandwich shops is based on which of the following? a. Quality b. Location c. Style True or False: Positive short-run profit can occur as a result of advertising in a monopolistically competitive market. O False O True

Answer 1

Answer:1. B. and C. Location and

Style

2. True

Step-by-step explanation:

Product differentiation are strategies employed by organizations to make their goods and services unique when compared to those of their competitors or even similar products within their brand.

Location played a role in the presentation of the Sandwich products and services in the Suburban and Downtown areas. The style was made to suit the needs of people in unique environments.

A monopolistic competitive market is one in which different organizations sell similar products. In the short run, the profit generated is positive. These kinds of organizations depend hugely on advertising to promote their goods and services.

Answer 2

Step-by-step explanation:

Both shops offer the exact same menu and food quality.

One shop is located in an upscale downtown area. The other shop is located in a strip mall in the suburbs. The interior of the downtown shop includes leather booths, oak tables, and plasma televisions. The interior of the suburban shop is more modest, with plastic tables and folding chairs.

So, product differention is based on location and style.

Hence, the correct answer is the option (b) and (c).

Advertising helpes a monopolistically competitive firm to differentiate its product from other competing products; help it in gaining market share. This gives firm some opportunity to earn positive economic profit in short-run.

The given statement is True.