Attempts: 1. Characteristics of competitive markets The model of competitive mar
ID: 1114204 • Letter: A
Question
Attempts: 1. Characteristics of competitive markets The model of competitive markets relies on the following three core assumptions: Average: 14 Aa Aa * There must be many buyers and sellers-a few players can't dominate the market * Firms must produce a standardized product-buyers must regard all sellers' products as equivalent. * Firms and resources must be fully mobile, allowing for free entry into and exit from the industry. In other words, there are many potential sellers. Taken together, these three conditions imply that in a competitive market, all firms are price takers, i.e., they do not have influence over the price of their product. Identify whether each of the following scenarios describes a competitive market, along with why or why not. Competitive? Why or Why Not? Scenario There are hundreds of colleges that serve millions of students each year. The colleges vary by location, size, and educational quality, which allows students with diverse preferences to find schools that match their needs. There are hundreds of high school students in need of algebra tutoring services. Dozens of companies offer tutoring services; parents decide on tutors, and they view the quality of the tutoring at the different companies to be largely the same. Two taxi companies serve most of the market in a big city. Consumers don't care which taxi company they take-if they decide it's worth taking a taxi, they flag down the nearest one. The government has granted the U.S. Postal Service the exclusive right to deliver mail. No, not a standardized product No, no free entry No, only a few sellers Yes, meets all assumptions QNA 3.16 © 2004-2016 Aplia. All rights reserved. © 2013 Cengage Learning except as noted. All rights reserved. Grade It Now Save & Continue Continue without saving
Explanation / Answer
Ans)
Scenario :
1. No, not a standardized product
As the passage mentions the product of the college ie the educational quality is diverse.Thus,it cannot be perfect competition.
2.
Yes, meets all assumptions
There are large number of buyers and sellers,standardized products and free entry and exit all requirements of perfect competition are met.
3.
No, only a few sellers.
Since there are only two sellers this is not perfect competition.
4.
No, no free entry
Since the government has given exclusive rights to a single firm which creates obstacles to entry hence this is not perfect competition.
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.