The Market For Textbooks Is Characterized By Perfect Competition

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(A). The market for textbooks is characterized by perfect competition. In economic theory, perfect competition in the market applies where none of the participants has the market power of setting a price of a homogeneous (identical) product. Basically, a perfectly competitive market exists when every participant is a “price taker” and cannot influence the price of the product it buys or sells. There are certain characteristics which describe the perfect competition, however the conditions are strict and some argue that perfectly competitive markets do not exist in practice or if there are, the number is limited. The basic structural characteristics that the market requires are: 1. There are no barriers of entrance or exit – the access to perfectly competitive market is extremely easy, due to the large number of buyers and sellers, which brings us to the second point. 2.Great number of supply and demand, which means that there are a lot of buyers willing to buy a certain product at a certain price, and vice versa – a lot of companies, willing to supply the product at a certain price. 3. The products are identical– the market good’s quality and characteristic do not vary among firms and companies, and the goods or services are perfect substitutes for each other. 4. Companies sell the product when the highest profit is generated i.e. where the marginal cost meets the marginal revenue (P=MC=MR). Therefore, we cannot approximate the market for textbooks as a perfect

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