Consider the following goods and services. Which are the most likely to be produ

Question

Consider the following goods and services. Which are the most likely to be produced in a perfectly competitive industry? Which are not? Explain why you made the choices you did, relating your answer to the assumptions of the model of perfect competition. Please address all of the examples below in your discussion. 1. Coca-Cola and Pepsi 2. Potatoes 3. Private physicians in your local community 4. Government bonds and corporate stocks 5. Taxicabs in Lima, Peru—a city that does not restrict entry or the prices drivers can charge 6. Oats Consider the following goods and services. Which are the most likely to be produced in a perfectly competitive industry? Which are not? Explain why you made the choices you did, relating your answer to the assumptions of the model of perfect competition. Please address all of the examples below in your discussion. 1. Coca-Cola and Pepsi 2. Potatoes 3. Private physicians in your local community 4. Government bonds and corporate stocks 5. Taxicabs in Lima, Peru—a city that does not restrict entry or the prices drivers can charge 6. Oats Consider the following goods and services. Which are the most likely to be produced in a perfectly competitive industry? Which are not? Explain why you made the choices you did, relating your answer to the assumptions of the model of perfect competition. Please address all of the examples below in your discussion. 1. Coca-Cola and Pepsi 2. Potatoes 3. Private physicians in your local community 4. Government bonds and corporate stocks 5. Taxicabs in Lima, Peru—a city that does not restrict entry or the prices drivers can charge 6. Oats

Explanation / Answer

1.Coca-Cola and Pepsi :This cannot be most likely to be perfectly competitive industry . It is because Coca cola and pepsi will be earning supernormal profits in the long run.

2. Potatoes -This will be most likely to be a perfectly competitive industry. It is because there are infinite numbers of buyers and sellers,

3.Private physicians in your local community- This cannot be most likely to be perfectly competitive industry . It is because private physicians will be earning supernormal profits in the long run. Physician has differentiating qualities that set them separate from everyone else, some making them better than others. Also acquiring complete information on every physician might be difficult or not available due to the lack of a central database. Since these conditions have not really been met, these are not perfectively competitive goods

4. Government bonds and corporate stocks most likely to be in a perfectly competitive industry because the consumers have no preference over the bonds or stocks, only the price and future value, therefore the goods are homogenous. The stock market is quite large and therefore there are plenty of buyers and sellers. The entry and exit into themarket is easy with the rise of new businesses, and companies are required give access to complete information therefore it meets all the requirements of being in a perfectlycompetitive market. Bonds are an alternative to stocks, and depending on the rate of return and future value, a consumer has no preference over a stock or bond, only on profit.

5 Taxicabs in Lima, Peru—a city that does not restrict entry or the prices drivers can charge - This will too be part of perfect competitive industry as it is very difficult to earn high profits for the long run as new players will enter in the market. Moreover, there are other subsititutes ways of transportation which will cap on the prices taxi operaters might charge.

6. oats -This will be most likely to be a perfectly competitive industry. It is because there are infinite numbers of buyers and sellers,

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