In most large cities there are a large number of bakeries. These bakeries produce similar, but not identical, products. Some bakeries claim to have the best cheesecakes in town, while others brag about their cookies or specialty breads. The bakery market in a large city is an example of:
A) monopolistic competition.
B) perfect competition.
C) an oligopoly.
D) a monopoly.

Question

Quizplus · Accepted Answer

Monopolistic competition exists when there are many firms in the market, but each firm produces slightly differentiated products. Bakeries in a large city produce similar but not identical baked goods, and each bakery may have a unique specialty or claim to have the best products. Therefore, the bakery market in a large city is an example of monopolistic competition. Perfect competition would require identical products, an oligopoly would involve a small number of large firms dominating the market, and a monopoly would require only one firm in the market.

In Most Large Cities There Are a Large Number of Bakeries