MindTap Cengage Learning MINDTAP Homework (Ch 14) Due Today at 11 PMCST The mode
ID: 1110751 • Letter: M
Question
MindTap Cengage Learning MINDTAP Homework (Ch 14) Due Today at 11 PMCST The model of competitive markets relies on these three core assumptions 1. There must be many buyers and sellers-a few players can't dominate the market 2. Firms must produce an identical product-buyers must regard all seliers' products as equivalent. 3. Firms and resources must be fully mobile, allowing free entry into and exit from the industry. The first two conditions imply that all consumers and firms are price takers. While the third is not necessary for price-taking behavior, assume for this problem that a market cannot maintain competition in the long run wilthout free entry. Identify whether or not each of the following scenarios describes a competitive market, along with the correct expianation of why or why not. Scenario Competitive? There are dozens of pasta producers that sell pasta to hundreds of Italian restaurants nationwide. The restaurant owners buy from the cheapest pasta producer available to them. The governmient has granted the U.S. Postal Service the exclusive right to deliver mail. Several stores in the mall sell hooded sweatshirts. Each store's sweatshirts reflect the makers use higher-quality cotton than style of that particular store. Additionally, some others, which is reflected in the apparel's prices. Two taxi companies serve most of the market in a big city. Consumers don't care which they take-if they decide it's worth taking a taxil, they fiag down the nearest IfExplanation / Answer
1. Scenario first describes the competitive market because there are numerous sellers and buyers nationwide and the seller with lowest price gets to sell the maximum.
2. This scenario doesn’t describe competitive market. This is because US postal service alone has exclusive rights to deliver mail and there is no competition.
3. This scenario also doesn’t describe competitive market because here some are using high quality cotton while other’s not. This will be reflected in apparels quality.
4. This also is not describing the competitive market because there the only two players and consumers don’t have many options to explore.