Question

Determine which market model best describes the scenario:

There are dozens of pasta producers that sell pasta to hundreds of Italian restaurants nationwide. The restaurant owners buy from the cheapest pasta producer they can. While pasta manufacturers must pay licensing fees to their local government and undergo regular food-safety inspections, anyone who has passed inspections can acquire and maintain their license.

a) Monopolistic Competition
b) Oligopoly
c) Perfect Competition
d) Monopoly

Answer 1

c) Perfect Competition

Step-by-step explanation:

A perfect competition is characterised by many buyers and sellers of homogenous goods and services. There are no barriers to entry and exit of firms. Firms are price takers

A monopolistic competition is when there are many buyers and sellers of differentiated goods and services. Sellers set their market price.

An oligopoly is when few large firms dominate an industry. There are really high barriers to entry and exit of firms.

A monopoly is when there is only one firm operating in an industry. There are high barriers to entry and exit of firms. The firm sets market price.

In this question, the market model describes a perfect competition because there are many sellers of identical goods (pasta).

I hope my answer helps you