Answer each separately

Critique points made in each response(1-2 points)

1. Monopolistic competition creates an economic environment in which two places can offer the same product, or similar products at the same time, while still competing within the exact same market. When it comes to grocery stores, local grocery stores that are not as popular as grocery chains are often overshadowed by their more established big name competition. A great example of this, would be how places like Walmart, Target, or Ralphs/Safeway; often obliterate their local competition by providing a more streamlined shopping experience, much lower prices, and by stocking exclusive items that are not locally sourced. Due to the introduction of the supermarket, the prices at the local grocery store will have to change; it would be within the local stores best interests to keep an eye on output as well due to the benefits allotted by the supermarket. The local grocery store can expect to lose profit and possibly, even though they should lower their prices at first- be forced to increase them in order to stay afloat. The only way to recover or at least maintain some of their market share, would be to rebrand themselves; Maybe by mentioning the importance of local grocery stores, or building deals with locally sourced brands in order to offer items that the supermarket cannot. Or at the very least offer them at a lower price or with more incentives than what the other supermarket offers. When I lived in San Francisco, their was a local Asian market down the street from my apartment, where they offered exclusive items that could not be found at the local Safeway Supermarket. This, along with being owned by an Asian family who lived in the neighborhood, gave everyone in the sunset an incentive to visit the shop and purchase what they had to offer. Once a month, they also provided a farmers market outside, where locally sourced produced was on full display, there was music, beads to purchase, paintings, and they even cooked food for purchase. It was something that a lot of us in the sunset looked forward too, the dumplings were out of this world. Due to the fact that the supermarket will most likely have superior pricing in comparison to imported or 'name brand' products; It would be in the best interest of the local store to not try and compete with them in that department. They should still offer what they can, but focus on the allure of local or 'organic' products that support the community. Taking on a different identity while still having similar offers would do them well in the long run, and help them to not lose as much market-share and profit as they would otherwise.
2. If a new grocery store were to open a few miles away, that would shift my store's perceived demand curve and go the marginal revenue curve to the left. My store's profits would change because the new store will reduce the number of customers buying products from my store with the new store. Because the marginal revenue has shifted, then the profit-maximizing quantity will change. This is due to the marginal revenue equaling marginal cost at a lower quantity. In order to maximize profit, I would need to reduce the quantity and lower the prices. My store's profits would still be decreased; however, by reducing the quantity and lowering the prices, the store is still making as much profit as possible. In the short run, my store may still earn above average profits, but in the long run, profits may eventually go to the point of zero economic profit because of this new store entering my store's market. Additionally, to defend the store's market share against the new store, I would run advertising for new discount sales and a rewards program. If my store is well-known for having discounts and a solid rewards program, then this would help retain more customers and increase sales.