Which of the following best describes the economic concept illustrated when the Regal Cycle Company manufactures three types of bicycles?

• A. Price controls imposed by the government
• B. Perfect competition with identical goods
• C. Product differentiation in a competitive market
• D. Monopoly power due to a single product

Answer: (C)

Verified step by step guidance

1. Step 1: Understand the concept of product differentiation. This occurs when firms produce goods that are similar but not identical, allowing them to distinguish their products from competitors'.
2. Step 2: Recognize that the Regal Cycle Company manufacturing three types of bicycles illustrates product differentiation because each type of bicycle can be seen as a distinct product variant.
3. Step 3: Contrast this with perfect competition, where goods are identical and firms are price takers, which does not fit the scenario of multiple bicycle types.
4. Step 4: Note that price controls imposed by the government refer to legal limits on prices, which is unrelated to the variety of products offered by a firm.
5. Step 5: Understand that monopoly power arises when a single firm dominates the market with a unique product, which is not the case here since multiple types of bicycles imply product variety rather than a single product monopoly.