Think about a firm that you have done business with recently. What industry does

Question

Think about a firm that you have done business with recently.  What industry does this firm belong to?  For example, McDonald's is a firm in the fast food industry.  What market structure would this industry fall under?  What are the names of other firms in this industry?  Is it monopolistic competition, oligopoly, monopoly, or perfect competition?  Justify your classification of the firm.  Use the characteristics/features of the different market structure to determine which market structure to classify your choosen firm.

Explanation / Answer

The fast food industry is an example of monopolistic competition structure. The features are similar to perfect competition. There are many buyers and sellers with minimal barriers to entry selling differentiated products. Firms are price-takers. Product differentiation is the process which producers are able to convince consumers that their particular product is different from other producers.

This industry has many producers competing for the dollars of consumers. All are welcome to start a fast-food restaurant as long as they pay the required licenses. Most producers have a good idea of what they are getting into and customers tend to understand the products. Each firm offers different menu. McDonald's and Subway all compete against each other in the fast-food market while providing customers with a variety of choices. Product differentiation is one of the reasons that new entrants are able to survive in this cut-throat industry. Being different offers you a chance.

Price competitions increase market share by lowering prices through free food vouchers and giveaways. There are non-price competitions product development over the years and the use of advertising. It also faces static inefficiency where allocative and productive efficiency is not achieved.

It is of monopolistic structure. The characteristics of this market structre are:

1. Number of producers: Highly fragmented industry;largest producer (McDonald

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