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Sort the list below according to whether or not an item is an assumption made under perfect competition, I.e, pure competition or competitive industry.

  1. -A small number of producers
  2. -Significant barriers to entry
  3. -Many buyers
  4. -Firms selling similar but different goods
  5. -Price taking behaviour
  6. The market for cars
  7. -The market for pizza in a large city
  8. -The marker for corn
  9. -The market for dollars
  10. -The market for designer shoes
  11. -The market for 14 karat gold

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Nusrat Fatima
Nusrat FatimaLv10
28 Sep 2019

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Related questions

11-Short-run costs which increase and decrease as an output increases or decreases are called: a.Variable costs b.Secondary costs c.Derived costs d.Partial costs e.Potential costs 12.The addition to total cost resulting from the addition of the last unit of output is called the: a.Total variable cost b.Average variable cost c.Fixed cost d.Implicit cost e.Marginal cost 13.The fact that a single large factory may be more efficient than several smaller factories of the same total capacity is a reflection of: a.Increasing returns of scale. b.The law of diminishing marginal returns c.Comparative advantage d.The crowding-out effect e.Reproduction cost of assets 14.A possible reason for the existence of increasing return to scale is: a.The inability of a firm to increase all inputs proportionally b.Problems of coordination and control c.Higher input prices d.Larger fixed costs with a larger plant size. e.Greater specialization 15.The model of perfect competition is useful because: a.Most firms in the real world are perfectly competitive b.Perfectly competitive firms exert significant perfect competition. c.Government regulation is designed to eliminate perfect competition. d.It is a model of an ideal world which sheds much light on a market structure’s effects on resources allocation e.Advertising agencies are heavily dependent on the advertising dollars of perfectly competitive firms 16.A market consisting of many firms producing homogeneous products, having complete knowledge of relevant information, no power over the product’s market price, and low barriers to entry is characteristic of: a.Perfect competition b.Monopoly c.Monopolistic competition d.Oligopoly e.None of the above markets 17.A market consisting of many firms, low barriers to entry, some control over price, but considerable non-price competition is characteristic of: a.Perfect competition b.Monopoly c.Monopolistic competition d.Oligopoly e.None of the above. 18.A market consisting of a few firms producing similar products with significant barriers to entry is characteristic of: a.Perfect completion. b.Monopoly c.Monopolistic competition. d.Oligopoly e.None of the above

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 buyer must regard all sellers' products as equivalent.
3. Firms and resources must be fully mobile, allowing for 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 behaviour, 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.

Is the scenario Competitive?
Dozens of companies produce plain white socks. Consumers regard plain white socks as identical and don't care who manufactures their socks.  
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.  
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.  
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.  

1. if the government attempts to break up a natural monopoly to enforce competition in an industry

A. the average cost of producing the good will increase

B. the smallest firm will have a significant cost advantage over the larger, less efficient firms

C. the average cost of producing the good will decrease

D. the price paid by consumers will be expected to remain the same.

2. which statement is true?

A. the monopolistic competitor always makes a profit in the short run

B. the monopolistic competitor operates at peak efficiency

C. product differentiation takes place in the minds of the buyers

D. none of these statements is true

3. Price discrimination

A. occurs when a good or service is resold

B. is prohibited by law

C. occurs when a seller charges two or more prices for the same good or service

D. occurs when the seller charges different prices for different quality products

4. Monopolistic competition may lead to each of the following except

A. inefficiency

B. overdifferentiation

C. overcapacity

D. monopoly profits

5. In the long run in monopolistic competition

A. most firms are making a profit

B. the absence of entry barriers ensures that there are no profits

C. economies of scale ensure that there are no profits

D. most firms are losing money

6. Price discrimination means

A. charging different prices for identical goods that have identical production costs

B. paying wages according to race or sex rather than productivity

C. exploiting the working masses by charging the highest single price possible.

D. eliminating all costs so that only pure profits are realized

7. The definition of monopolistic competition includes

A. few firms and ease of entry and exit

B. few firms and barrieres to entry and exit

C. many firms and barriers to entry and exit

D. many firms and ease of entry and exit

8. Which statement is true?

A. there are many firms in a monopolistically competitive industry.

B. monopolistic competitors produce an identical product

C. in order for product differentiation to take place, there must be clear physical differences amont the products sold

D. none is true

9. Long-run equilibrium for firms in monopolistically competitive industries is similar to that for firms in perfect competition in that

A. price equals minimum possible average total cost

B. price equals marginal cost

C. marginal revenue equals average total cost

D. price equals average total cost

10. Which statement is false?

A. Oligopolies are illegal in most states

B. most oligopolies engage in outright collusion

C. Ford motor company is an oligopoly

D. none of these statements is false

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