Question

Identify a firm which operates in monopolistic competitive environment and a firm which operates in an oligopoly environment. Explain how you concluded the firm was monopolistic competitive or an oligopoly.

Then describe what are the challenges to profits faced by each firm? Which firm is likely to have a much higher rate of return? What challenges to profits arise due to supply chain and intermediary consumers such as processor and distributors.

Answer 1

answer:

monopolistic competition : is the market competition where the large number of firms exist and they provide differentiated products which are close substitute for each other. there is free entry and exit of firms and firms have some control over the prices.

oligopoly competition: there are few firms in the market and they have control over the prices of the products. there is barriers for the entry and exit of the firms.

the firms under fast food industry like McDonald, KFC, textile brands,consumer goods industries etc. comes under monopolistic competition.

the automobile firms, cell phone companies and steel industry etc. are example of oligopoly markets

through the number of the firms in the market and the competition among the firms we can conclude if the firm is monopolistic or a oligopoly firm.

to earn the profit firms has to face competition from other firms and the demand for their products in the market. the firms faces challenge to show their products better than other firm's products and they face the challenge of prices from other firms

the oligopoly firms will have more return due to few number of firms operating in the markets. the higher the number of firms in the market the more will be the competition and the return will be less