Question

Identify whether or not each of the following scenarios describes a competitive market, along with the correct explanation of why or why not.

Scenario

a. 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.
b. The government has granted the U.S. Postal Service the exclusive right to deliver mail.
c. A few major airlines account for the vast majority of air travel. Consumers view all airlines as providing basically the same service and will shop around for the lowest price.
d. 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.

Answer 1

a. It is a competitive market: There are many colleges (hundreds). Students have options.

b. It is not a competitive market: The US Postal Service has exclusive right (monopoly).

c. It is not a competitive market. The market is an oligopolistic competition. The competition is limited by the few number of sellers.

d. It is a competitive market. There are many dozens of producers. The buyers have choices to make.

Step-by-step explanation:

In a purely competitive market, there are many sellers and many buyers. No seller or buyer dictates the price, supply, or demand. The market forces interact to achieve market equilibrium.