While Tender Chicken Inc. operates in a monopolistically competitive industry, Future Wireless Inc. operates in a monopoly. Keeping this information in mind, which of the following statements is most likely true?
A) The threat of new entrants will be higher for Tender Chicken than for Future Wireless.
B) Tender Chicken will have more pricing power than Future Wireless does.
C) Tender Chicken will have more profit potential than Future Wireless.
D) The number of buyers will be limited for both Tender Chicken and Future Wireless.

Question

Quizplus · Accepted Answer

The threat of new entrants is higher for Tender Chicken than for Future Wireless. A monopolistically competitive industry is characterized by many firms, a differentiated product, some obstacles to entry, and the ability to raise prices for a relatively unique product while retaining customers. An industry is a monopoly when there is only one (large) firm supplying the market.