Use your basic knowledge and your understanding of market structures to answer this question. Which of the following companies most closely approximates a monopolistic competitor?
A) Subway Sandwiches
B) Pittsburgh Plate Glass
C) Ford Motor Company
D) Microsoft

Question

Quizplus · Accepted Answer

A monopolistic competitor is a firm that has many competitors, but it differentiates its products or services from others in some way. This type of market structure is characterized by a large number of firms, differentiated products, some control over pricing, and relatively easy entry and exit from the market.
Let's analyze the options provided:
A) Subway Sandwiches - Subway operates in the fast-food industry, which has many competitors. Each Subway franchise can differentiate itself through location, service, and slight variations in menu offerings. This industry has relatively low barriers to entry and exit, and firms have some control over pricing.
B) Pittsburgh Plate Glass (PPG) - PPG is a supplier of paints, coatings, and specialty materials. While there may be some level of product differentiation, the market for these materials is likely to be less fragmented than the fast-food industry, and PPG may have fewer competitors and potentially higher barriers to entry due to the need for specialized technology and production facilities.
C) Ford Motor Company - Ford operates in the automotive industry, which has a significant number of competitors, but the industry is characterized by high barriers to entry due to the substantial capital investment required. While there is product differentiation, the number of firms is relatively small compared to a monopolistically competitive market.
D) Microsoft - Microsoft is a technology company that, in some of its markets (like operating systems with Windows), has characteristics closer to a monopoly or an oligopoly due to high barriers to entry and a limited number of competitors. However, in other markets (like video game consoles with Xbox), it may face more competition.
Based on the characteristics of monopolistic competition, option A) Subway Sandwiches most closely approximates a monopolistic competitor. Subway operates in a market with many competitors, has differentiated products, some control over pricing, and faces relatively low barriers to entry and exit.

Use Your Basic Knowledge and Your Understanding of Market Structures