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Several years ago, Alcoa was effectively the sole seller of aluminum because the firm owned nearly all of the aluminum ore reserves in the world. This market was not perfectly competitive because this
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Several years ago, Alcoa was effectively the sole seller of aluminum because the firm owned nearly all of the aluminum ore reserves in the world. This market was not perfectly competitive because this situation violated the:

User Jammin
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1 Answer

9 votes
9 votes

Answer:

price-taking assumption.

free entry assumption.

Step-by-step explanation:

A perfectly competitive market is one in which different firms compete for consumers of their products. The characteristics of the perfectly competitive market are:

- products are nearly identical

- all the firms are price takers. That is they are not able to determine price independently

- buyer knowledge of information about products is perfect and available to all

- free entry and exit to the market

- resources are perfectly mobile

In the given scenario above two of these rules are not obeyed.

Alcoa was effectively the sole seller of aluminum because the firm owned nearly all of the aluminum ore reserves in the world.

So they determine the price ( they are not price takers)

Also since they own nearly all the aluminium reserves there is no free entry for new firms

User Elias Toivanen
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