Question

Karan works at a shoe store where the latest trends in shoes are displayed. Down the road from his store, two more stores opened up and began selling similar styles of shoes. His store no longer has a monopoly in shoes on that road. What would happen to the price of shoes in Karan’s area? A price would happen in Karan’s area, because customers now have more options for shoes.

Answer 1

A price WAR would happen...

Answer 2

Answer:

A price war would happen in Karan’s area, because customers now have more options for shoes.

Explanation:

Before two more shoe opened up, the shoe store where Karan works was a monopoly. In economics, monopoly market is a market where there is just only one seller who can charge an abnormally high price for its product as there are no other seller in the market.

The opening up of two more stores that began selling similar styles of shoes as Karan's Shore Store will bring about a Perfect Oligopoly.

A perfect oligopoly exists when there are two or more but less than 20 firms/sellers who sell identical products in a industry/market. As a result, each firm/sell must consider the price charged by the other firms/seller before setting its own price. This will lead to a price war and will make the price of the product, in this case shoe, to fall.