Question

 1. Characteristics of competitive 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 large in relation to total sales or purchases. In other words, a few players can't dominate the entire market.

 2. Each firm produces and seills a homogeneous product that is indistinguishable from all other firms' products in a given industry. That 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 easily. There are no barriers to entry or exit.

 The first three assumptions imply that all consumers and firms are price takers. The final assumption is not necessary for price-taking behavior, but guarantees that a market remains competitive in the long run.

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

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

 Several stores in the mall sell hooded sweatshirts Each store's sweatshirts reflect the style of that particular store. Additionally, some stores use higher-quality cotton than others, which is reflected in the apparel's prices.

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

 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.

Answer 1

1. It is not perfectly competitive because there are only two firms. under perfect competitive, there are large number of sellers.

2. It is not perfectly competitive because the products are not identical. There is product differentiation on the basis of style and also different prices are charged.. This type comes under monopolistic competition.

3. It comes under competitive market because there are large number of buyers and sellers and also products are identical since they don't regard who manufactures their socks.

4. It is not perfectly competitive because there is only one seller. Since , he owns copyright for his product, no one else can produce an identical product for it. This type of market structure is called monopoly.