In the following list is a number of well-known companies and the product that they sell. Which of the four types of markets (perfect competition, monopoly, monopolistic competition, oligopoly) best characterizes the markets in which they compete? Explain why. Hint: You may wish to distinguish between national and local/regional markets for some firms.
a. McDonald's - hamburgers
b. Exxon-Mobil - gasoline
c. Dell - personal computers
d. Heinz - ketchup
e. Proctor & Gamble - disposable diapers
f. Starbucks - gourmet coffee
g. Domino's - pizza
h. Intel - computer chips for PC's
a. McDonald's hamburgers = Perfect competition
This is a perfectly competitive market. Anybody who is interested to go into hamburger business can enter the market. The business does not require large quantities of resources. A key to this venture is the availability of local raw materials. Hamburger is present in all states, mainly through different franchises.
Hamburgers are served by McDonald's, KFC, Burger King, Taco Bell, and Wendy's. That is only franchises with international markets. Different countries have also their own burger producers and distributors.
b. Exxon-Mobil gasoline = Oligopoly
In the gasoline (or fuel) industry, Exxon is just one of those firms in the market selling identical products- gasoline. Exxon and other fuel firms can collude to have control over fuel prices because there are only a few of them in the industry. Entry into the fuel ...
The solution identifies the different markets structures these businesses operate - McDonald's, Exxon-Mobil, Dell, Heinz, Proctor & Gamble, Starbucks, Domino's, and Intel.