In the area around xyz University, a number of food vendors gather each lunchtime to sell food to university students who are tired of Hostel food. The university and the city have no license fees that apply to food vendors, preferring to let the market dictate how many and which vendors show up.

Many different cuisines are represented on the street corner, including a cart sponsored by Tipu Burger sells a burger of either Chicken or Beef for Rs.100. The food is made in the morning at nearby restaurant in DHA, when the kitchen is otherwise unoccupied.

His crew of three, each of whom earns Rs.200 per hour, takes 2 hours to make the 50 meals required by Tipu. In creating these burgers, they use ingredients equal to Rs.2000. Tipu hires another worker to load her cart with food and sell it during the lunch hours. That worker costs Rs.100 per hour and typically sells out the entire cart of 50 meals in 2 hours. The cart is rented for Rs.1000 per 5-day week. (The carts are not in operation on the weekends, when Tipu is too busy at his restaurant).

A.What market structure does this business most resemble? What characteristics lead you to this conclusion?    
B.What would you expect to see happen in this business? Use the data in the problem to support your conclusions.

Answer rating: 100% (QA)

a This market is in monopolistic competition This can be justified from the following features ... View the full answer