Ashlee wants to open her own food truck. She applies for her business license, gets a small business loan to purchase the truck, food supplies and 2 months wages for 3 teenage employees. She knows there are a few other food trucks in her area, but she will also need to compete with the many fast food restaurants. She decides that she will specialize in healthy alternatives to fast food in order to gain business. She pays to have 2 of her employees train with a famous Vegan chef.

Question

Which of the following BEST describes the market structure that Ashlee is entering?

(1 point)
Responses

pure competition
pure competition

oligopoly
oligopoly

monopolistic competition
monopolistic competition

monopoly

Answer 1

The best description of the market structure that Ashlee is entering is monopolistic competition.

Monopolistic competition is characterized by many sellers (in this case, food trucks and fast food restaurants), product differentiation (healthy alternatives to fast food), and relatively easy entry and exit from the market (which applies to starting a food truck). Ashlee's focus on healthy food options helps differentiate her business from both other food trucks and fast food restaurants, which is a key characteristic of monopolistic competition.