Question

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 sellers' 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 without free entry.

Answer 1

True

False

False

True.

Step-by-step explanation:

The question is incomplete. Here is the complete question.

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 sellers' 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 without free entry.

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

1. Dozens of companies produce plain white socks. Consumers regard plain white socks as identical and don't care who manufactures their socks.

2. 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.

3. Scholastik Inc. owns the U.S. copyright to a popular book series. It is the only company with the legal right to publish books in the series in the United States.

4. In a small town, there are two providers of broadband Internet access: a cable company and the phone company. The Internet access offered by both providers is of the same speed.

1. Yes. This scenario describes a competitive market. It is a perfect competition because the socks sold by the manufacturers are identical.

2. No. This is not a competitive market because in this scenario, the customer believes a particular coffee tastes better than the others. In this scenario, the coffee sold in the market is not identical.

3. No. This isn't a competitive market because only one firm has a copyright to publish a particular book, this is an example of a monopoly.

4 Yes. This is a competitive market a identical goods are sold. Although, there are only two sellers, the internet services provided area identical and it was not mentioned that there is restriction in entry.