Checking Your Knowledge

Question

A moderately-priced jewelry store is trying to
differentiate itself from other jewelry stores. The store
prices products somewhat lower than the super-
premium jewelry stores but offers better products and
services than low-end jewelry stores provide. The
market situation this store faces sounds most like:
A. pure competition.
B. monopoly.
C. oligopoly.
D. monopolistic competition

Answer 1

The market situation the jewelry store faces sounds most like:

D. monopolistic competition.

In monopolistic competition, many firms offer products that are similar but not identical, allowing them to differentiate based on quality, branding, or service, as is the case with the jewelry store in question. This type of market features a variety of competitors, each with some degree of pricing power due to product differentiation.