8. Use the model of industrial organization characteristics to decide whether th

Question

8. Use the model of industrial organization characteristics to decide whether the following firms following firms are likely to be organized as monopolies, perfectly competitive, oligopolies or monopolistically competitive. Explain chose what you chose. petitive. Explain carefully why you a) A local band that plays for weddings, parties, and so on. b) Minute Maid, a producer of individual serving-size juice boxes c) Your local dry cleaner d) A farmer who produces soybeans. e) Your local hairdresser.

Explanation / Answer

a)There are many bands that play at weddings, parties, and so on. There are no significant

barriers to entry or exit. The commodity are differentiated by quality (for

example, some bands have better musicians or better electronic equipment) or by

style (for instance, different bands play different types of music). The 3 conditions

for monopolistic competition stand fulfilled.

b. The industry for individual-serving juice boxes is has few very big

firms and there exist significant

barriers to entry, partially because of the substantial costs  (for example, advertising)

involved in gaining any market share of the national market. Commodities are, however,

differentiated—in certain cases, the only differences are in the minds of consumers.

Due to the fewer number of competitors, the industry is closer to

oligopoly.

c. There are a large number of dry cleaners, and each delivers a product differentiated

by location: customers are likely to prefer to utilize the dry cleaner closest to

their home or workplace. Lastly, there are no significant barriers to entry. This is hence

a monopolistically competitive market.

d. There are a many soybean farmers, and there is free entry and exit in

this industry. However, soybeans are not differentiated from each other—they are

a standardized product. No individual soybean farmer has market power. This

industry is a perfectly competitive industry.

e)local hairdresser-monopolistic competition

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