A health care firm is looking to expand to international markets in an effort to increase profits. One potential location has only a few competing health care providers,each holding a significant percentage of market share. Licensing requirements are high, but the firm may consider establishing a presence in the new location to enjoy ___.
the high prices that arise from perfect competition
The high prices that arise from monopolistic competition
The horizontal demand curves
The downward sloping demand curves
it’s the downward sloping demand curves
Yes, you're correct. The firm may consider establishing a presence in the new location to enjoy the downward sloping demand curves, which indicate that as the firm increases its prices, it can still attract customers and generate higher profits. This is because there are few competing health care providers and high licensing requirements, creating a relatively limited supply in the market.
The firm may consider establishing a presence in the new location to enjoy the downward sloping demand curves.
The correct answer is:
The high prices that arise from monopolistic competition.
To arrive at this answer, it is important to understand the characteristics of different market structures. In this scenario, the fact that there are only a few competing health care providers in the potential location suggests that it is not a perfectly competitive market, which is characterized by a large number of competing firms. Instead, it is more likely a monopolistic competition market structure.
In monopolistic competition, there are multiple firms, but each firm sells a slightly different product or service, leading to product differentiation. This means that consumers have some level of brand loyalty or preference for a particular provider.
As a result, in a monopolistic competition market, firms have some degree of market power and can differentiate themselves through branding, marketing, or other factors. This allows them to charge higher prices for their unique offerings.
Therefore, if the health care firm establishes a presence in this location with few competitors, it can enjoy the high prices that arise from monopolistic competition.