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Suppose there are many independent dry cleaners in your city, each of which provides essentially the same service

Economics

Suppose there are many independent dry cleaners in your city, each of which provides essentially the same service. However, one offers local delivery, another offers free coffee in the shop, while another offers one-hour dry cleaning. Which of the following statements explains what is happening in this market? A) These firms are monopolistically competitive and are attempting to differentiate their product. B) These firms are perfectly competitive and are attempting to increase sales and maximize their profits. C) These firms are perfectly competitive and are engaging in non-price competition. D) These firms are oligopolistic and are engaging in strategic behaviour. E) These firms are perfectly competitive and are engaging in strategic behaviour. 
 

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Answer

A )

Explanation

Since there are many sellers offering slightly differentiated products or services these firms are not perfectly competitive. Since there are many firms in the market, this is also not oligopoly. It describes a Monopolistic Market structure where there are many sellers offering slightly differentiated products or services. So, the correct option is A.