1. Characteristics of price-taker markets Firms in the market will be price-take
ID: 1107564 • Letter: 1
Question
1. Characteristics of price-taker markets Firms in the market will be price-takers when the following conditions are met 1. All firms in the market produce an identical product. 2. A large number of firms (buyers and sellers) exist in the market, so that no single firm dominates the market. 3. Each firm supplies only a very small portion of total output supplied to the market. 4. No barriers limit entry into or exit from the market, and firms and resources are fully mobile. Use the dropdown menus in the following table to identify whether or not each of the following scenarios describes a competitive price-taker market, along with the correct explanation of why or why not. Scenario There are hundreds of high school students in need of algebra tutoring services in San Diego. Dozens of companies offer tutoring services, and the parents who seek out tutors view the quality of the tutoring at the different companies to be largely the same. 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. 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. The government has granted the US. Postal Service the exclusive right to deliver mail. Price-taker market?Explanation / Answer
(1) School students needing Algebra services:
- Yes, meets all assumptions
(2) Major airlines accounting for air travel:
- No, not many sellers
(3) Hundreds of colleges serving millions of students -
No, not an identical product (course vary by college)
(4) Government grants US Postal service exclusive right:
- No, no free entry
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