Question

Identify the number of firms, type of product and the marketing model for below scenarios.

A) A large city has lots of small shops where people can buy sweaters. Each store's sweaters reflect the style of that particular store. Additionally, some stores use higher-quality yarn than others, which is reflected in their price.
B) There are dozens of pasta producers that sell pasta to hundreds of Italian restaurants nationwide. The restaurant owners buy from the cheapest pasta producer they can. While pasta manufacturers must pay licensing fees to their local government and undergo regular food-safety inspections, anyone who passes inspections can acquire and maintain their license.
C) Only three airlines fly from San Francisco to Medford, Oregon. No new airline will enter this market because there are not enough customers to share among four or more airlines without each one experiencing substantially higher average costs. Consumers view all airlines as providing basically the same service, and they will shop around for the lowest price.

Answer 1

Characteristics of Monopolistic Competition: -

• Large number of firms
• Product differentiation
• No entry and exit cost in the long rim
• Challenging entry

Characteristics of Perfect Competition: -

• Large number of firms
• Identical products
• Easy to entry and exit

Characteristics of Oligopoly: -

• Few numbers of firms
• Identical or differential product
• Significant barriers to entry

Characteristics of Monopoly market: -

• Single firm
• No entry for new firms

Scenario 1

Number of firms = Many

Type of product = Differentiated product

Entry = Challenging

Market Model = Monopolistic

Scenario 2

Number of firms = Many

Type of product = Homogeneous product

Entry = Easy

Market Model = Perfectly competitive

Scenario 3

Number of firms = Few

Type of product = Identical product

Entry = Challenging

Market Model = Oligopoly