.cldAplac Student Queston x I. Charadternistics of competiftive markets The mode

Question

.cldAplac Student Queston x I. Charadternistics of competiftive markets The model of competitive markets relies on the following four core assumptions 1. There must be many buyers and sellers, none of which is tarpe in relation to total sales or can't dominate the market. industry. That produces and sells a homogeneous product that is indistinguishable from all other firms' products in a given is, buyers must regard all sellers' products as equivalent, or identical. 3. Buyers and sellers have all relevant information about prices, product quality, sources of supply, etc 4. Firms have free entry into and exit from the industry. New firms can enter the market easily, and existing firms can exit the market easity. There are no barriers to entry or ext. The first three assumptions imply that all consumers and firms are price takers. The final assumotion is not necessary for price-taking behavior, but guarant ees that a market remains competitive in the long run. ldentify whether or not each of che following scenarios descnibes a perfectly compettive market along with the correct explanation of why or iwhy not Perfectly competitive? Scenario A few major airlines account for the vast majonity 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 milions 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. There are dozens of pasta producers that sell pasta to hundreds of Italian restaurants natonwide. The restaurant owners buy from the cheapest pasta producer available to them. Sholastik Inc. owns the us. copyrght to a popular book senes. It is the only company with the legal right to publish books in the series in the United States . Harn else

Explanation / Answer

Perfect competition is not possible in case of few airliners because there are only few sellers in the market. Colleges that provide degrees are also not competiting in perfect manner because the degree varies. Hence there is no homogenous product

Pasta producers are selling pastas to all the restaurants with the same quality. This is an example of perfect competition. Scholastic is a monopoly so there is no perfect competition because there is no free entry.

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