CA Foundation · Business Economics · Price Determination in Different Markets
Which of the following is an example of non-price competition commonly seen in monopolistic competition?
Heavy spending by a soap brand on advertising and packaging is non-price competition. Firms in monopolistic competition try to win customers by differentiating products through branding, advertising and service rather than by changing price. The other options describe price taking, regulation or collusion.
- AHeavy spending by a soap brand on advertising and packagingCorrect
- BA wheat farmer matching the mandi price
- CA government-set price for electricity
- DTwo firms jointly fixing the price of cement
Explanation
Non-price competition means competing through advertising, branding, packaging and service rather than price cuts. A soap brand doing this is typical of monopolistic competition. A farmer accepting the mandi price is a price taker, a government tariff is regulation, and joint price fixing is collusion in oligopoly.
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