Question

Match each term to its description in market structures:

Identify the market structure with many companies and some product differentiation.

Options:
a) Monopolistic Competition
b) Product Differentiation
c) Oligopoly
d) Price-Fixing

Answer 1

The market structure with many firms and product differentiation is 'Monopolistic Competition,' where firms use various means like price and advertising to compete.

Step-by-step explanation:

Understanding Market Structures and Product Differentiation

The market structure characterized by many companies and some level of product differentiation is Monopolistic Competition. In this type of market, firms compete based on price, advertising, and the unique features of their products. Product Differentiation is a strategy used by companies in monopolistic competition to distinguish their products from those of competitors, often through branding and quality differences. This can include variations in design, features, or customer service. Firms in an Oligopoly market structure, on the other hand, are fewer and they tend to compete strategically in prices, output, and sometimes engage in Price-Fixing. Oligopolies and monopolies have higher barriers to entry compared to more competitive market structures.

Answer 2

Monopolistic Competition is the market structure where many firms sell differentiated products and compete on the basis of product differences, advertising, and sometimes price.

Step-by-step explanation:

The market structure characterized by many companies and some product differentiation is Monopolistic Competition. In such a market, firms compete with each other by offering slightly different products or services, engaging in advertising to create distinct brand images, and occasionally adjusting prices. Differentiated products are those that, while essentially serving the same purpose, have variations that distinguish them from competitors' offerings. These differences could include quality, features, styling, reputation, or customer service. Thus, in Monopolistic Competition, firms do not compete solely on price but also through other factors such as product differentiation and advertising.