Answer to Question #209110 in Microeconomics for Qiniso

Question

The market for 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 behaviours that link them to this type of market structure.

Answer 1

In monopolistic competition, there exists a large number of sellers and buyers with similar but differentiated goods. Each firm makes independent decisions on price depending on their market and cost of production. The market has no barriers to entry and exit in the industry. Like KFC, chicken likens and Nandos, fast-food chicken restaurants deal with similar but differentiated products that make them fit in this market category.