Question

The image above shows a departmental store of a market structure.

1. Identify the form of market as observed from the above image.
2. Discuss the features of this market form with respect to:
   1. Type of product
   2. Entry and exit of firm
   3. Selling cost

Answer 1

1. The above graphic depicts a monopolistic market. The department store offers a diverse range of brands and items, demonstrating competition among firms. However, product differentiation gives each firm considerable market power.
2. The features of the monopolistic competition market with respect to the given points:
   1. Type of Product: The market features differentiated products. The commodities are close equivalents for one another, but they are not identical. Sellers differentiate their products through branding, packaging, quality, design, and unique features (for example, different detergent formulations or shampoo scents).
   2. Entry and Exit of Firm: Firms in the industry can freely enter and exit. If a new firm wants to introduce a new brand into the market, there are no legal or economic impediments, and existing firms can stop manufacturing and depart if they are losing money.
   3. Selling Cost: Selling costs are very high and necessary in this market form. Because products are close substitutes, businesses must spend a lot of money on advertising, promotional campaigns, appealing packaging, and sales incentives to persuade customers to select their brand over competitors.