Characteristics of competitive markets 1. Yes, meets all assumptions / No, no ea
ID: 1109547 • Letter: C
Question
Characteristics of competitive markets
1. Yes, meets all assumptions / No, no easy entry / No, not a standardied product / No, only a few sellers
2. Yes, meets all assumptions / No, no easy entry / No, not a standardied product / No, only a few sellers
3. Yes, meets all assumptions / No, no easy entry / No, not a standardied product / No, only a few sellers
4. Yes, meets all assumptions / No, no easy entry / No, not a standardied product / No, only a few sellers
1. Characteristics of competitive markets Aa Aa The model of perfectly competitive markets relies on the following four core assumptions * 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. * Sellers must be able to easily enter or exit the market. Buyers and sellers must have all relevant information about the product. Taken together, these four conditions imply that in a perfectly competitive market, all producers and consumers are price takers. Identify whether each of the following scenarios describes a perfectly competitive market, along with why or why not. Competitive? Why or Why Not? No, no easy entry Scenario In a major metropolitan area, one chain of coffee shops has gained a large market share, because customers feel its coffee tastes better than that of its competitors. Dozens of companies produce plain white socks. Consumers regard plain white socks as identical and don't care about who sells them their socks. In a small town, there are two providers of broadband Internet access: aD cable company and the phone company. The Internet access offered by both providers is the same speed. The government has granted a patent to a pharmaceutical company for an experimental AIDS drug. That company is the only firm permitted to sell the drug.Explanation / Answer
Statement 1 - It is not a competitive market, this is because the product is not standardized (there is a difference in quality)
Statement 2 - It is a competitive market, all the assumptions are satisfied.
Statement 3 - It is not a competitive market, this is because there are only a few sellers in the market (two in this case)
Statement 4 - It is not a competitive market, this is because there is no easy entry for potential entrants (grant of patent by the government raises the barriers to entry in this market)