Popeyes Reveals a New Twist On Its Chicken Sandwich

EconEye Admin

4 years ago

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) 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

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

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

How many firms compete in the chicken sandwich market? Are the sandwiches identical or similar? What is the type of market?

In the chicken sandwich market, there are many firms, and each firm is producing a sandwich that is slightly different from its competitors. Firms compete on product quality price, and market, and firms are free to enter and exit the industry. The market is monopolistic competition.

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

b) 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

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

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

In a monopolistically competitive market, firms are constantly trying to make their product slightly different from their competitors to gain customers. When Popeyes’ rivals “launch new chicken offerings” and demand for Popeyes’ sandwiches decreases, what actions can Popeyes’ take to bring their customers back?

Popeyes responds by producing a new type of sandwich, and customers who had left to buy from the rivals, return to Popeyes. The demand for Popeyes’ sandwiches increases and its economic profit increases.

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