Which of the following goods are likely to be sold in a monopolistically competitive market?

A Perfect competition (PC) is a type of market form which has infinite buyers and sellers for commodities and sellers selling the same products.. Assumptions for PC are

• A Large number of buyers and sellers
• Complete knowledge of commodities and services.
• No selling cost
• Homogeneous or identical products are sold and the same price( P)
• No barriers to entry and firms are free to enter and leave the market.

The given products which can be produced under PC and the one which has a competitive market can be explained as follows:

1). Coca-Cola and Pepsi-Cola drinks- These two soft drinks cannot be produced in a PC market. As both the beverages differ from each other in terms of taste, ingredients, and way of packaging. This violates the basic assumption of the PC market about selling homogeneous products. Being similar products their producers invest in heavy advertising techniques to sell their products in the market. So, Coca-cola and Pepsi- cola cannot be produced in a perfectly competitive market.

2). Tomatoes - Farmers selling tomatoes have many sellers. Tomatoes are homogeneous. Farmers producing tomatoes are free to enter the market and leave. There are no selling costs as well. Also, the price received by the sellers in the market is the same. Hence, tomatoes can be produced in a PC market.

3). Private Doctors in the local community- Doctors in the local community differ from others in terms of experience and skills. There is a high chance of charging different fees from patients depending upon experience and expertise. Thus the services offered by private doctors cannot be discharged in a PC market.

4). iPhones- Producers of iPhones charge a high P from buyers. There is only one seller selling iPhones. It controls the market P and Q sold. The company also has high advertising and promotional expenses. Thus, it violates the assumptions of the PC market.

5). Intercity train services- Train services are operated mainly by the government of the country. It charges the same fare for every passenger of the same category. Now, no other agencies can run intercity train services, so the market cannot be considered a PC market. However, as the monopoly market is organized by the government of the country, it is often referred to as a social monopoly.

6). Foreign Exchange( FE) market- FE market consists of many traders and buyers of foreign currencies. The commodity transacted here is homogeneous. Foreign currencies are traded. Every participant in the FE market has perfect knowledge about the commodity traded. FE is open and free for the participants to enter and exit. Hence FE market is a PC market.

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