Dollar Tree and low-cost air carriers are examples of which type of business model in competitive markets?

• A. Monopolistic competition
• B. Vertical integration
• C. Cost leadership
• D. Product differentiation

Answer: (C)

Verified step by step guidance

1. Step 1: Understand the concept of business models in competitive markets. Business models describe how firms compete and create value, often through strategies like cost leadership, product differentiation, or vertical integration.
2. Step 2: Define 'Cost Leadership' as a business strategy where a firm aims to become the lowest-cost producer in its industry, allowing it to offer lower prices than competitors and attract price-sensitive customers.
3. Step 3: Recognize that Dollar Tree and low-cost air carriers focus on minimizing costs to offer products or services at lower prices, which aligns with the cost leadership strategy rather than product differentiation or monopolistic competition.
4. Step 4: Differentiate 'Monopolistic Competition' as a market structure where many firms sell similar but not identical products, often competing through product differentiation rather than just price.
5. Step 5: Understand that 'Vertical Integration' involves a firm controlling multiple stages of production or distribution, which is not the primary characteristic of Dollar Tree or low-cost air carriers.