ACCA Applied Knowledge · Business and Technology · Competitive factors
A market has many small sellers offering slightly differentiated products, such as independent cafes in a city. Each seller has some control over price because of branding and location, and entry into the market is easy. Which market structure does this describe?
This is monopolistic competition. There are many sellers with differentiated products, giving each some pricing power, and entry is easy. Perfect competition would need identical products, while oligopoly and monopoly involve few or one seller with high entry barriers.
- AMonopolistic competitionCorrect
- BPerfect competition
- COligopoly
- DMonopoly
Explanation
Many sellers, differentiated products, some price-setting power and easy entry define monopolistic competition. Perfect competition requires identical products and price-taking firms. Oligopoly has few dominant firms and high barriers, and monopoly has one seller.
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