In the context of competitive markets, what type of competitors are a store that sells books and a store that sells tools?

• A. Monopolistic competitors
• B. Indirect competitors
• C. Perfect substitutes
• D. Direct competitors

Answer: (B)

Verified step by step guidance

1. Step 1: Understand the definitions of the types of competitors in a competitive market. Direct competitors sell the same or very similar products to the same customers, while indirect competitors sell different products that can satisfy the same customer need or want.
2. Step 2: Identify the products sold by each store: one sells books and the other sells tools. These products are different and serve different purposes.
3. Step 3: Analyze whether the products are perfect substitutes. Since books and tools serve different needs, they are not perfect substitutes.
4. Step 4: Determine if the stores are monopolistic competitors. Monopolistic competition involves many sellers offering differentiated products, but this does not directly address the relationship between these two stores.
5. Step 5: Conclude that since the stores sell different products that may indirectly compete for consumer spending, they are best classified as indirect competitors.