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 eguivalent.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 thisproblem 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?Scholastik Inc. owns the U.S. copyright to a popular book series. It is the only companywith the legal right to publish books in the series in the United States.Yes, meets all assumptionsNo, no free entryIn a major metropolitan area, one chain of coffee shops has gained a large market sharebecause customers feel its coffee tastes better than that of its competitors.No, not many sellersNo, not an identical productIn a small town, there are two providers of broadband Internet access: a cable companyand the phone company. The Internet access offered by both providers is of the samespeed.Dozens of companies produce plain white socks. Consumers regard plain white socks asidentical and don't care who manufactures their socks.

Competitive market structure is also called perfect competition. In long run, firms in perfect…

Scenario Competitive? 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. Yes, meets all assumptions No, no free entry In a major metropolitan area, one chain of coffee shops has gained a large market share because customers feel its coffee tastes better than that of its competitors. No, not many sellers No, not an identical product 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. Dozens of companies produce plain white socks. Consumers regard plain white socks as identical and don't care who manufactures their socks.

Scenario Competitive? 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. Yes, meets all assumptions No, no free entry In a major metropolitan area, one chain of coffee shops has gained a large market share because customers feel its coffee tastes better than that of its competitors. No, not many sellers No, not an identical product 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. Dozens of companies produce plain white socks. Consumers regard plain white socks as identical and don't care who manufactures their socks.

Managerial Economics: A Problem Solving Approach

5th Edition

ISBN:9781337106665

Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Chapter16: Bargaining

Section: Chapter Questions

Problem 4MC

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