Which of the following industries is most likely to be monopolistically competitive?

• A. Electric utility companies
• B. Airline manufacturing
• C. Fast food restaurants
• D. Wheat farming

Answer: (C)

Verified step by step guidance

1. Step 1: Understand the characteristics of monopolistic competition. This market structure features many firms, product differentiation, free entry and exit, and some control over price.
2. Step 2: Analyze each industry based on these characteristics. For example, electric utility companies are typically natural monopolies due to high infrastructure costs, so they are not monopolistically competitive.
3. Step 3: Consider airline manufacturing, which usually has few firms and high barriers to entry, making it closer to an oligopoly rather than monopolistic competition.
4. Step 4: Examine wheat farming, which involves many producers but homogeneous products, fitting the model of perfect competition rather than monopolistic competition.
5. Step 5: Look at fast food restaurants, which have many firms offering differentiated products (different menus, branding, quality), relatively easy entry and exit, and some pricing power, matching the features of monopolistic competition.