Question

(a) Which market structure, Perfect Competition, Monopoly, or Monopolistic competition, will result in the greatest degree of choice between alternate products for consumers? Please give an explanation.

(b) In which market structure are firms most likely to advertise? Please explain.

Answer 1

A. In perfect competition the number of companies selling the product in the market is large and they deal in homogeneous products. Thus, the consumers don't have alternate product in perfect competition. In perfect competition the consumers are least worried about sellers.

In case of monopolistic competition the firms produce and sell differentiated product. Thus, in this market structure consumers have a number of choices to make the purchase.

B. Monopolistic firms majorly focus on product differentiation and they try to reach consumers through advertisement. Most of the monopolistic firms are likely to advertise.