Florida Teacher Certification Examinations (FTCE) Social Science Practice Test

Which of the following is most accurately described as an example of monopolistic competition?

1. The film industry

2. Agriculture

3. Public education

4. The automotive industry

The correct answer is: The film industry

Monopolistic competition is characterized by a market structure where many firms offer products that are similar but not identical. This allows each firm to have some degree of market power, enabling them to set prices above marginal cost. The film industry is a prime example of monopolistic competition because it consists of numerous producers and studios creating diverse films. Each film may cater to different audiences and have unique qualities, leading to product differentiation. This differentiation allows studios to compete for audience attention and box office revenues, but no single studio can dominate the market entirely. In contrast, agriculture typically represents perfect competition due to the abundance of similar products and the inability of individual farmers to influence market prices significantly. Public education is largely centralized and regulated, which does not fit the characteristics of monopolistic competition. The automotive industry, while having some characteristics of monopolistic competition, is better classified as an oligopoly because a few major companies dominate the market and influence pricing and competition to a greater extent. Thus, the film industry stands out as a clear example of monopolistic competition due to its inherent product differentiation and competitive dynamics among numerous firms.