Which of the following industries is the best example of monopolistic competition? a. Wheat b. Restaurant c. Automobile d. Water service

Monopolistic competition is a market structure in which many firms sell products that are similar but not identical. Each firm has some market power, allowing them to set their own prices rather than being price takers. Key features of monopolistic competition include product differentiation, many sellers, and easy entry and exit.

a. Wheat - The wheat industry is an example of perfect competition. This is because there are numerous producers of an identical product, and price is determined by supply and demand with no market power for individual producers. b. Restaurant - The restaurant industry fits the criteria for monopolistic competition. Restaurants offer similar products (food), but each restaurant has its own unique menu, location, and atmosphere that differentiates it from others. There are many individual restaurants in the market, and entering or leaving the market is relatively easy. c. Automobile - The Automobile industry is closer to an oligopoly market structure, as there are few large car manufacturers dominating the market. While there are product differentiations, the barriers to entry, such as large capital investments and technology, make it harder for new firms to enter the market. d. Water service - The water service industry is typically a natural monopoly. This is due to high fixed costs, such as infrastructure and distribution networks, and economies of scale that make it more efficient for a single company to supply the entire market.

Based on the analysis of each industry, option (b) Restaurant best fits the classification of monopolistic competition. The restaurant industry has many sellers, product differentiation, and relatively easy entry and exit.