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CMA Foundation · Fundamentals of Business Economics and Management · Forms of Market

Which of the following is an example of non-price competition by a firm in monopolistic competition?

Spending on advertising and branding to differentiate the product is non-price competition. Such selling costs aim to shift and make demand less elastic without changing price, which is typical in monopolistic competition where products are close but differentiated substitutes.

  1. ACutting price to match a rival's price
  2. BSpending on advertising and branding to differentiate its productCorrect
  3. CForming a cartel to fix output quotas
  4. DAccepting the market price as given

Explanation

Non-price competition uses advertising, branding, packaging and quality to differentiate the product and shift demand. Price cutting is price competition, a cartel is an oligopoly feature, and accepting the market price is perfect competition behaviour.

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