Question

This firm sells baseball caps outside of Dodgers Stadium, and competes against other firms selling slightly...

This firm sells baseball caps outside of Dodgers Stadium, and competes against other firms selling slightly differentiated baseball caps. What type of market is the firm operating in?

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Answer #1

The firm is operating in a monopolistically competitive market.

Explanation:

In a monopolistically competitive market the number of firms is large but not as large as monopoly. In this market the firms do not sell identical product. They sell slightly differentiated products. This is the main characteristics of a monopolistically competitive market. In our example also baseball cap sellers sell slightly differentiated caps. Hence, this is a monopolistically competitive market.

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