Answer to Question #128018 in Microeconomics for floris

Question

Identify any five examples of industries operating under conditions of monopolistic competition and outline any of their salient features to justify your selection.

Answer 1

Restaurants – restaurants compete on quality of food as much as price. Product differentiation is a key element of the business. There are relatively low barriers to entry in setting up a new restaurant.

Taxi’s

Local taxi firms seek to differentiate themselves through factors such as pre-bookings, limousine service, or through a fleet of different cars. There are many firms in the market, yet cannot be considered perfectly competition due to: levels of differentiation, imperfect information on drivers, and the ability to make supernormal profits during peak periods.

Clothing. Designer label clothes are about the brand and product differentiation

TV programmes – globalisation has increased the diversity of tv programmes from networks around the world. Consumers can choose between domestic channels but also imports from other countries and new services, such as Netflix.

Hair dressing- Often a large number of firms that use quality of service as a differentiator. Many customers will come back to the same hairdresser as they obtain trust and offer a quality of service. At the same time, there are low barriers to entry, with new stores opening frequently.