Answer to Question #204429 in Macroeconomics for nonjabulo

Question

the market fast-food chicken restaurants, like KFC, chicken licken, and Nandos are said to be within the category of monopolistic competition. examine this market for characteristics and behaviors that link them to this type of market structure. ( 60 marks)

Answer 1

KFC, chicken Licken, and Nandos among others belong to the fast food or take ways industry, and industry touted by many as monopolistic market structure. For an industry to be in a monopolistic competition;

(i) There must be many firms,

(ii)The firms should offer differentiated but close substitutes,

(iii)The industry should be relatively easy to enter and exit, and

(iii)Their prices should be reasonably close.

Since these characteristics apply to these firms, the market can be classified as

being of monopolistic competition.