Characteristics of competitive marketsThe 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 exit from the industry. The first two conditions imply that all consumers and firms are price takers. While the third is not necessary for price-taking behavior, assume for this 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 of why or why not.ScenarioCompetitive?In a small town, there are two providers of broadband Internet access: a cable company and the phone company. The Internet access offered by both providers is of the same speed.Yes, meets all assumptions / No, no free entry / No, not many sellers / No, not an identical productThe government has granted a patent to a pharmaceutical company for an experimental AIDS drug. That company is the only firm permitted to sell the drug.Yes, meets all assumptions /No, no free entry / No, not many sellers / No, not an identical productDozens of companies produce plain white socks. Consumers regard plain white socks as identical and don't care who manufactures their socks.Yes, meets all assumptions / No, no free entry / No, not many sellers / No, not an identical product Several stores in the mall sell hooded sweatshirts. Each store's sweatshirts reflect the style of that particular store. Additionally, some makers use higher-quality cotton than others, which is reflected in the apparel's prices.Yes, meets all assumptions / No, no free entry / No, not many sellers / No, not an identical product

Monopolistic market: It refers to that market in which there is a large number of buyers and sellers…

Answered: Identify whether or not each of the…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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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 exit from the industry.

The first two conditions imply that all consumers and firms are price takers. While the third is not necessary for price-taking behavior, assume for this 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 of why or why not.

Scenario	Competitive?
In a small town, there are two providers of broadband Internet access: a cable company and the phone company. The Internet access offered by both providers is of the same speed.	Yes, meets all assumptions / No, no free entry / No, not many sellers / No, not an identical product
The government has granted a patent to a pharmaceutical company for an experimental AIDS drug. That company is the only firm permitted to sell the drug.	Yes, meets all assumptions / No, no free entry / No, not many sellers / No, not an identical product
Dozens of companies produce plain white socks. Consumers regard plain white socks as identical and don't care who manufactures their socks.	Yes, meets all assumptions / No, no free entry / No, not many sellers / No, not an identical product
Several stores in the mall sell hooded sweatshirts. Each store's sweatshirts reflect the style of that particular store. Additionally, some makers use higher-quality cotton than others, which is reflected in the apparel's prices.	Yes, meets all assumptions / No, no free entry / No, not many sellers / No, not an identical product

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