The fast food industry is a prime example of a monopolistically competitive market. It is characterized by a large number of firms, each offering a similar but not identical product. This type of competition is different from perfect competition, as the products are differentiated and companies have some discretion when it comes to setting prices. In the fast food industry, each restaurant has plenty of substitutes nearby, such as other restaurants, fast food establishments, and the delicatessen and frozen food sections of local supermarkets.
Direct competitors are other fast food companies such as McDonald's, Starbucks, Subway, Taco Bell, Chick-Fil-A, Wendy's, Burger King, KFC, Sonic, Arby's, etc. The benefits and perks of monopolistic competition include the fact that the mix of food and style satisfies all types of people from all walks of life. Everyone competes with each other in food, drinks, and ambience, but their particular type of food and drink is distinctive and special in some way. Jay & Ray's Big Burgers & Fries will compete with other fast food restaurants in St.
Louis. Since Jay & Ray's Big Burgers & Fries is a local fast food company, the competitors will also be local fast food restaurants. Below is a profile of each competitor: Union Loafers is a bakery and coffee shop located in the heart of Botanical Heights in St. They bake bread with natural yeast using old world techniques.
They are open during lunch for sandwiches, soups and salads. For dinner, they transform their bakery into a pizzeria that also serves wine and beer. At Union Loafers, they serve simple, classic meals driven by quality and community. Lion's Choice is another local fast food restaurant in St. Louis that specializes in roast beef sandwiches.
Over the years, Lion's Choice has expanded its menu to include other quality offerings such as oven-roasted turkey, smoked ham with American walnut, pulled pork, and a variety of fresh salads. The original roast beef exclusive to Lion's Choice, the natural cut fries and the frozen custard are still the star dish at St. Louis chain's most popular offering and will continue to be a local favorite. Suppose that your city's restaurant industry which is monopolistically competitive is in long-term balance when hiring difficulties cause restaurants to offer higher salaries to cooks, waiters and dishwashers. Using graphics similar to those in Figure 11.1 The short-term balance in monopolistic competition and Figure 11.2 Monopolistic competition in the long term explain the effect of wage increases on industry in the short and long term. In Figure 11.1 we see the short-term balance in monopolistic competition according to which Mama's Pizza is obtaining economic benefits.
In the Slovak Republic a monopolistically competitive company can achieve positive economic benefits as shown by the area dyed red. The competitive monopolistic model also predicts that while companies can achieve positive economic benefits in the short term the entry of new companies will shift the demand curve faced by each company to the left and economic profits will fall towards zero. Monopolistic competition is similar to perfect competition in the sense that in both market structures there are many companies that make up the industry and entry and exit are quite easy. Monopolistic competition is also similar to monopoly in the sense that like monopoly companies companies that compete in a monopolistic way have at least some discretion when it comes to setting prices. In conclusion, fast food restaurants are an example of a monopolistically competitive market where firms offer similar but not identical products and have some discretion when it comes to setting prices. The benefits of this type of competition include satisfying all types of people from all walks of life with different types of food and drinks.