Popeyes Reveals a New Twist On Its Chicken Sandwich

Popeyes’ new chicken sandwich features a new sauce. McDonald’s, KFC, Wendy’s, and others have also launched new chicken offerings. As rivals’ efforts continue to weigh on sales, Popeyes is producing new sandwiches. Recently, the chain introduced a fish version.—cnn.com

Answer the following questions to check your understanding of the story.

In what type of market do the producers of chicken sandwiches compete?

The producers of chicken sandwiches compete in ______________.

a) monopoly because all firms are producing the same good—chicken sandwiches

b) monopolistic competition because many firms produce slightly different sandwiches, the firms compete on quality, price, and marketing, and firms are free to enter and exit the market

c) oligopoly because chicken sandwich producers are dependent on the decisions of the other producer

d) perfect competition because many firms produce similar sandwiches, firms are free to enter and exit the market, everyone is aware of the price of a sandwich, and in the long run all firms make zero economic profit

What is Popeyes’ response when its “rivals’ efforts continue to weigh on sales”?

The demand for Popeyes’ sandwiches and its economic profit decrease, so Popeyes ______________.

a) trims its costs and in the long run breaks even

b) produces a new type of sandwich, and demand for Popeyes’ sandwiches and economic profit increase

c) increases its advertising budget, produces a new type of sandwich, increases production to eliminate excess capacity and makes positive economic profit in the long run

d) produces a new type of sandwich and decreases production to maximize profit at a quantity where marginal revenue exceeds marginal cost

Popeyes Reveals a New Twist On Its Chicken Sandwich

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