[Answer] 3. Which of the following industries is not an example of monopolistic competition?

Answer: Airlines.
3. Which of the following industries is not an example of monopolistic competition?

Monopolistic competition is a type of imperfect competition such that there are many producers competing against each other but selling products that are differentiated from one another (e.g. by branding or quality) and hence are not perfect substitutes. In monopolistic competition a firm takes the prices charged by its rivals as given and ignores the impact of its own prices on the prices of ot…

Monopolistic competition is a type of imperfect competition such that there are many producers competing against each other but selling products that are differentiated from one another (e.g. by branding or quality) and hence are not perfect substitutes. In monopolistic competition a firm takes the prices charged by its rivals as given and ignores the impact of its own prices on the prices of other firms. If this happens in the presence of coercive government monopolistic competition will fall into government-granted monopoly. Unlike perfect competition the firm maintains spare capacity. Models of monopolistic competition are often used to model industries. Textbook examples of industries with market structures similar to monopolistic competition include restaurants cereal clothing shoes and service industries in large cities. The “founding father” of the theory of monopolistic competition is Edward Hastings Chamberlin who wrote a pioneering book on the subject Theory of Monopolistic Competition (1933). Joan Robinson published a book The Economics of Imperfect Competition with a comparable theme of distinguishing perfect from imperfect competition. Further work on monopolistic competition was undertaken by Dixit and Stiglitz who created the Dixit-Stiglitz model which has proved applicable used in the sub fields of international trade theory macroeconomics and economic geography. Monopolistically competitive markets have the following characteristics: There are many producers and many consumers in the market and no business has total control over the market price.Consumers perceive that there are non-price differences among the competitors’ products.Firms operate with the knowledge that their actions will not affect other firms’ actions.There are few barriers to entry and exit. Producers have a degree of control over price.The principal goal of the firm is to maximize its profits.Factor prices and technology are given.A firm is assumed to behave as if it knew its demand and cost curves with certaint… Read more on Wikipedia

There are six characteristics of monopolistic competition (MC): • Product differentiation • Many firms • Freedom of entry and exit

There are six characteristics of monopolistic competition (MC): • Product differentiation • Many firms • Freedom of entry and exit • Independent decision making • Some degree of market power • Buyers and sellers do not have perfect information (Imperfect Information) Product differentiation MC firms sell products that have real or perceived non-price differences. Examples of these differences could include physical aspects of the product location from which it sells the product or intangible aspects of the product among others. However the differences are not so great as to eliminate other goods as substitutes. Technically the cross price elasticity of demand between goods in such a market is positive. In fact the XED would be high. MC goods are best described as close but imperfect substitutes. The goods perform the same basic functions but have differences in qualities such as type style quality reputation appearance and location that tend to distinguish them from each other. For example the basic function of motor vehicles is the same—to move people and objects …

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