Question

Mia and Jack are two chocolate producers. Mia packs her chocolates in attractive boxes and charges slightly more than Jack does. Despite her slightly higher prices, consumers are more attracted to Mia’s chocolates. What market structure does this situation represent? A. oligopoly B. monopolistic competition C. monopoly D. perfect competition

Answer 1

The correct answer is B. Monopolistic competition

Explanation:

Monopolistic competition occurs when the producers of a product determine the price of it. Also, the products sold have differences, which means consumers do not consider one product can be substituted by another because the qualities, brand, appearance, etc. are different. This is the opposite of perfect competition, in which products are substitutes and price is determined by price and demand rather than producers.

Monopolistic competition occurs in the case presented because the chocolates sold by Jack are different from those sold by Mia, who uses attractive boxes. Also, due to this difference, Mia can set higher prices and still get more demand from consumers.