1. Characteristics of competitive markets The model of competitive markets relie

Question

1. Characteristics of competitive markets 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 ext from the industry. price takers. While the third is not necessary for price-taking behavior, assume for this The first two conditions imply that all consumers and firms are 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 a competitive market, along with the correct explanation of why or why not. Scenarico There are hundreds of high school students in need of algebra tutoring services in Miami. Dozens of companies offer tutoring services, and the parents who seek out tutors view the quality of the tutorning at the different companies to be largely the same There are hundreds of colleges that serve millions of stude Competitive? The colleges vary by location, size, and educational quality, which enables students with diverse preferences to find schools that match their needs. A tew major airlines account for the vast majority of air travel. Consumers view au airines as providing basically the same service and will shop around for trie lowest price. The government has granted the U.S. Postal Service the exclusive right to deliver mai

Explanation / Answer

-There are hundreds of high school students.....- yes meets all assumptions.

There are many buyers of tutoring services and many sellers of tutoring services providing same services of same quality.

-there are hundreds of colleges........ - no, not an identical product

Colleges vary in terms of educational quality, size and location. This implies good is not identical.

- A few major airlines.......- no, not many sellers

There are not large number of airlines.

- the government has granted.......- no, no free entry

Government has given exclusive right to US postal services which means no new firm can do so and hence cannot enter.

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