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Can you name five examples of perfectly competitive markets? Why or why not?

a. Yes, because they have many buyers and sellers
b. No, because they have monopolistic competition
c. Yes, because they have differentiated products
d. No, because they are controlled by the government

1 Answer

5 votes

Final answer:

True perfectly competitive markets are virtually non-existent, but some industries such as agriculture and foreign exchange exhibit similar characteristics. Companies in such markets are price takers, hence an aggressive advertising campaign is unlikely to have long-term benefits due to the standardized nature of products.

Step-by-step explanation:

It is challenging to name five examples of perfectly competitive markets because such markets exist mostly as a theoretical model in economics and perfectly competitive markets are rare in the real world. However, some industries come close, such as agricultural markets for wheat, corn, and other commodities where products are homogeneous and numerous buyers and sellers exist. Other parallels might be found in foreign exchange markets or online marketplaces like eBay for certain standard goods. These markets approach perfect competition as they have a multitude of participants and standardized products, but true perfect competition is essentially unattainable in practice.

Regarding a company in a perfectly competitive market considering an aggressive advertising campaign, it should be understood that in a market of this nature, since products are homogeneous, firms are price takers and can't influence market price. Advertising might increase awareness temporarily but won't create lasting customer loyalty or allow the firm to charge a premium. Hence, a heavy investment in advertising may not provide a significant return in the long run.

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