Gourmet Cupcakes Essay

621 WordsMar 29, 20143 Pages
Gourmet cupcakes have been booming in the market, we might as well call them the All-American sugary treat. This dessert became a cultural and economic phenomenon over the last decade. There are some special characteristics to why the gourmet cupcake market would be considered a monopolistic competition. The problem firms are dealing with now is so many people are joining the market that different firms are cannibalizing each other and they need a way to keep an increase on its profits. It seems this idea is so trendy that everyone wants to get their hands in the batter. The market for gourmet cupcakes has characteristics of a monopolistic competition. This market has a fairly large number of sellers,’ differentiation in products, and finally freedom of entry and exit of firms. Since cupcakes are such a popular trend now they are selling fast and in large amounts. If something is popular society is going to want. These cupcakes are much differentiated. The gourmet cupcakes they are selling are not plain cupcakes. They are called gourmet for a reason. These cupcakes have various and delicious fillings, frostings, and decorations. If you wanted you can get a milkshake flavored cupcake. One last characteristic that makes this market a monopolistic competition is that the barriers to enter and leave are low. If you have the capital to open up a cupcake shop then there is nothing stopping you, also there is no patent on their product therefore they have the right to produce it. If a monopolistically competitive firm wanted to maximize its profit’s, they have to have it where marginal revenue is equal to marginal cost. The problems firms are dealing with now are that so many people want to get their hands in the batter and join this market and it is affecting existing firms. Let’s say Charlie’s cupcake shop has been running business for the last couple of

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