Structure of Toothpaste Industry in India

The toothpaste industry in India is best described as monopolistically competitive. This can be explained as follows:

Definition of Monopolistic Competition

Monopolistic competition is a market structure where there are many firms selling differentiated products that are close substitutes for each other. Each firm has a degree of market power due to the uniqueness of its product, but there is still some competition from other firms.

Characteristics of Monopolistic Competition

1. Large Number of Firms: In a monopolistically competitive market, there are many firms that produce similar but differentiated products.

2. Differentiated Products: Firms in this market produce products that are similar but not identical to their competitors.

3. Some Control Over Price: Due to product differentiation, firms in monopolistic competition have some control over the price of their product.

4. Easy Entry and Exit: Firms can easily enter and exit the market, which means that there is no barrier to entry.

5. Non-Price Competition: Firms in this market compete on factors other than price, such as product quality, brand image, and advertising.

Application to Toothpaste Industry in India

1. Large Number of Firms: The toothpaste industry in India has many firms, including large multinational companies like Colgate-Palmolive and Hindustan Unilever, as well as smaller domestic players.

2. Differentiated Products: Toothpaste brands in India offer a range of products that cater to different consumer needs, such as sensitivity, whitening, and herbal formulations.

3. Some Control Over Price: Toothpaste companies in India have some control over the price of their products due to product differentiation and brand image.

4. Easy Entry and Exit: There is no barrier to entry in the toothpaste industry in India, which means that firms can easily enter and exit the market.

5. Non-Price Competition: Toothpaste companies in India compete on factors other than price, such as product quality, brand image, and advertising.

Conclusion

In conclusion, the toothpaste industry in India is best described as monopolistically competitive due to the presence of many firms selling differentiated products with some degree of market power.

Correct option is C)

It's a monopolistically competitive market as there are many firms selling differentiated but close substitutes products and each firm has its own individual brand. Each of them uses advertisements to attract customers and compel them to buy the product.