Answer to Question #97699 in Microeconomics for keke

Question #97699
Monopolistic Competiton
Compare and contrast the competition for one of the following by selecting five firms in the industry:
a) fast food restaurants (Choose this)
b) hotels/motels
c) dress stores
How are the firms similar to and how are they different from other firms in the industry? Explain why competing businesses frequently locate in close proximity. How can a business keep track of the competition in the community?
Expert's answer


For fast food restaurants in a monopolistic competition, means that each restaurant sells its own types of food stuffs and therefore in such a market most food stuffs substitute each other. Also, in such a market the restaurants are free to join or exit the industry voluntarily.  In this competition the restaurants are aware of the technology they all use and also the prices of food sold.

The competing businesses are frequently located in close proximity so as to utilize the available resources and technology that might not be found elsewhere. This may also result due to the type of competition the businesses are into for example, in monopolistic competition most firms are closely located (one industry).

A business can keep track of the competition in the community by comparing itself with other businesses in the same community in terms of number of workers employed, capital employed, the type of advertisement used by the other businesses and the rate which the businesses renew their stock.

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