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Question about Imperfect Competition

Subject Economics

Economics

Source Originais Teachy

Originais Teachy

Topic Imperfect Competition

Imperfect Competition

Difficulty Hard

Hard

(Originais Teachy 2023) - Question Hard of Economics

The city of Econville is known for its unique coffee market, characterized by a small number of coffee shops that all sell distinct types of coffee beans. Even though there are more than one coffee shop, they each have their unique selling propositions and customer base, which prevents them from being perfect substitutes for each other. This market structure is neither a perfect competition nor a monopoly. Based on the scenario given, can you identify what type of market structure is being described? Furthermore, analyze the implications for both consumers and producers in this type of market structure. What predictions can you make about the pricing and output decisions of the coffee shops?

The market structure being described is perfect competition. In this type of market structure, each coffee shop is a price taker, and consumers have a variety of choices. Prices are determined by the market, and the output will be determined by the demand for each coffee shop's unique coffee beans.

The market structure being described is monopolistic competition. In this type of market structure, each coffee shop has some degree of market power to set their own prices, and consumers have a variety of choices. Prices may be higher than in a perfectly competitive market, and the output will be determined by the demand for each coffee shop's unique coffee beans.

The market structure being described is oligopoly. In this type of market structure, a few coffee shops dominate the market, and consumers have limited choices. Prices may be higher than in a perfectly competitive market, and the output will be determined by the strategic decisions of the coffee shops.

The market structure being described is monopoly. In this type of market structure, one coffee shop dominates the market, and consumers have no choices. Prices are set by the monopolist, and the output will be determined by the monopolist's profit-maximizing decision.

The market structure being described is duopoly. In this type of market structure, two coffee shops dominate the market, and consumers have limited choices. Prices may be higher than in a perfectly competitive market, and the output will be determined by the strategic decisions of the two coffee shops.

Answer sheet:

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