Suppose Burger King builds a new store across the street from a McDonald's.This is an example of
A) the free-rider problem.
B) the principle of minimum differentiation.
C) the public provision of a good.
D) a public good.
E) rational ignorance on the part of Burger King.

Question

Quizplus · Accepted Answer

The principle of minimum differentiation suggests that firms in a competitive market will try to differentiate their product offerings as minimally as possible in order to appeal to the largest customer base. Burger King building a new store across the street from a McDonald's is an example of this principle in action, as they are competing in the same market and location. This is not an example of the free-rider problem, public provision of a good, or a public good. Rational ignorance on the part of Burger King is also not a relevant factor in this scenario.

Suppose Burger King Builds a New Store Across the Street