ACCA Applied Knowledge · Business and Technology · Microeconomic factors
A café in a city centre sells coffee similar to many other cafés nearby but advertises its own distinctive blend and ambience, allowing it to charge slightly more than rivals. Which market structure does this best illustrate?
This illustrates monopolistic competition. There are many sellers with easy entry, but each differentiates its product through branding and ambience, which gives it limited power to charge slightly higher prices than competitors.
- AMonopolistic competitionCorrect
- BMonopoly
- CPerfect competition
- DDuopoly
Explanation
Many sellers, low barriers to entry and differentiated products giving some limited price-setting power are the hallmarks of monopolistic competition. Perfect competition requires identical products, and monopoly and duopoly involve one or two sellers.
Did you get it right without looking?
One question tells you little. A timed set on Microeconomic factors shows your real accuracy, how long you take and where you lose marks.
More Microeconomic factors questions
- A bakery doubles its output and finds that its average cost per loaf falls because it can now buy flour in bulk at a lower price. Which type…
- Which of the following would cause the supply curve for a manufactured good to shift to the right?
- A government sets a maximum price for rental housing below the free-market equilibrium rent. Which outcome is most likely?
- Which of the following is a typical barrier to entry that helps a firm retain a dominant market position?
- The market for a product has demand Qd = 120 − 2P and supply Qs = 20 + 3P, where P is the price in $. The government imposes a minimum price…
- When household incomes rise by 5%, demand for a company's premium chocolate rises by 9%, while demand for its basic own-brand biscuits falls…