Answer to Question #209127 in Economics of Enterprise for Qiniso

Question

The market for chicken restaurants, like KFC, Chicken Licken and Nandos, are said

to be within the category of monopolistic competition. Examine this market for

characteristics and behaviours that link them to this type of market structure

Answer 1

In a monopolistic competition market, there is a large number of sellers and buyers dealing with similar but differentiated products. The market also has no barrier to entry and exit, and each firm makes independent decisions on the price to charge depending on their cost of production and the market. KFC chicken linen and Nandos deal with a similar but differentiated product, making them fit in the monopolistic competition market.