As shown in the I Love Lucy video clip, A Little Bit of Cuba and a Big Hunk of A

Question

As shown in the I Love Lucy video clip, A Little Bit of Cuba and a Big Hunk of America are both in the restaurant market. Imagine the kind of market structure that restaurants in general operate in.

a. Using the table provided in the AVP describing the characteristics of the different market structures, classify the market structure that restaurants in general operate in. Explain your reasoning.

AVP-Market Structures

Slide content:

• Characteristics

– Number of firms

– Barriers to entry

• Structures

– Perfect competition

– Monopolist

– Monopolistic competition

– Oligopoly

Explanation / Answer

They operate in monopolistic competition because there are many restaurants, they have differentiated goods and services, they can set price of goods and services,less than perfect knowledge is found, there is free entry and exit, the demand curve is more elastic than in perfect competition  

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