Q.Write a short note on: Selling Costs

Step 1 — Read the two clues

The stem gives two features: (i) many sellers and (ii) differentiated products. Match them against the four structures.

Step 2 — Test each structure

• (A) Perfect competition — many sellers but a homogeneous product; fails the 'differentiated' clue.
• (B) Monopolistic competition — many sellers, each with a slightly differentiated product and some price-setting power; fits both clues.
• (C) Oligopoly — only a few interdependent sellers; fails 'many'.
• (D) Monopoly — a single seller; fails 'many'.

Step 3 — Conclusion …

Step 1 — Identify the market features

The soap and detergent market has: many producers, heavily differentiated brands, easy entry, and each brand enjoying some pricing power through advertising and loyalty.

Step 2 — Match to a structure

Those features are the signature of monopolistic competition — a large number of sellers with product differentiation. The wide range of competing brands (each slightly different) is the giveaway.

Step 3 — Eliminate the rest

• (A) Monopoly — a single seller; clearly not soaps.
• (B) Oligopoly — only a few dominant firms; too few for the crowded soap market.
• (D) Perfect competition — requires an identical product with no branding; soaps are branded and differentiated. …

Step 1 — Extract the clues

The scenario states: (i) many similar burger options exist → many sellers; (ii) the chain uses a unique sauce to differentiate and customers perceive the product as distinct → product differentiation.

Step 2 — Match to the structure

Many sellers of differentiated (close-substitute) products, with free entry, is monopolistic competition. Each firm has a little price-setting power over its differentiated variety but faces intense competition from close substitutes.

Step 3 — Reject the rest

• (A) Perfect competition — needs homogeneous products; here they are differentiated.
• (B) Monopoly — needs a single seller; here there are many. …