Case Study: Monopolistic Competition

1) There are three market types know as Perfect Competition, Monopolistic Competition, and a Monopoly. In the market structure of Perfect Competition there is a large number of producers that produce standardize objects, but they have no power, low barriers to entry, and have a lot of competition. Moreover, the market structure of Monopolistic Competition also has a large number of producers and low barriers to entry, like “Perfect Competition”; nonetheless the product is differentiated, so therefore they have some power, and competition. And lastly the market structure of Monopoly has only one producer that produces a unique product, so they will therefore have a lot of power, no competition, and very high barriers to entry. An example of this can be Bob’s Coffee shop. In Bob’s case he has a coffee shop located in a location where there are no coffee shops around. As a result, his business becomes a Monopoly, so therefore he chooses whatever price he wants, and in this case he charges $2.00. For all that, Tom finds out that Bob is making a positive economic profit. He therefore starts his own coffee shop, which causes Bob and Tom to have a Monopolistic competition. Because they are in a Monopolistic Competition, they will compete against who has the better price and try to have differentiated product. So therefore they

The reason why there is a large unemployment rate is because people will seek the jobs that are increasing their minimal wage, so therefore it will cause a shortage. A way that other policies can promote consumers’ purchasing power without adversely affecting the labor market is by providing them with food stamps. Another way that they can do is to provide them with affordable housing that employees can pay. And a last way that they can do is by providing Medicare, so their health care won’t be as