10a Characteristics of competitive markets The competitive market model depends on the following 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, assur 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 nc Scenario Is the market competitive? There are thousands of car dealerships that serve millions of consumers each year. The dealerships vary by location, offerings, and quality, allowing consumers with an array of Yes, satisfies all assumptions preferences to find vehicles that match their individual needs. No (no free entry) There are several dozen crust makers that distribute their frozen products to hundreds of No (not many sellers) pizza shops nationwide. The shop owners source crusts from the cheapest available No (not an identical product) producer. Gentoo Inc. controls the copyright to a popular series of mystery novels. It is the only company with the right to legally publish books in the series in the United States. A few major airline companies represent a great majority of total air travel. Consumers consider all different flights to be essentially the same, and comparison shop for the lowest price.10b . . Profit maximization using total cost and total revenue curves Suppose Jayden operates a handicraft pop-up retail shop that sells cardigans. Assume a perfectly competitive market structure for cardigans with a market price equal to $20 per cardigan. The following graph shows Jayden's total cost curve. Use the blue points (circle symbol) to plot total revenue and the green points (triangle symbol) to plot profit for cardigans for quantities zero through seven (including zero and seven) that Jayden produces. 200 175 Total Revenue 150 Total Cost 125 0 Profit 100 TOTAL COST AND REVENUE (Dollars) S 25 2 3 4 5 6 7 QUANTITY (Cardigans) Calculate Jayden's marginal revenue and marginal cost for the first seven cardigans they produce, and plot them on the following graph. Use the blue points (circle symbol) to plot marginal revenue and the orange points (square symbol) to plot marginal cost at each quantity.Marginal Revenue 30 25 Marginal Cost COSTS AND REVENUE (Dollars per cardigan) 20 15 10 2 7 QUANTITY (Cardigans) Jayden's profit is maximized when they produce a total of cardigans. At this quantity, the marginal cost of the final cardigan they produce is $ , an amount than the price received for each cardigan they sell. At this point, the marginal cost of producing one more cardigan (the first cardigan beyond the profit maximizing quantity) is |$ , an amount than the price received for each cardigan they sell. Therefore, Jayden's profit-maximizing quantity occurs at the point of intersection between the curves. Because Jayden is a price taker, the previous condition is equivalent to10c . Short-Run Outcomes 1. Short Run STEP: 1 Suppose the book-printing industry is competitive and begins in a long-run equilibrium. Then Hi-Tech Printing Company invents a new process that sharply reduces the cost of printing books. Suppose Hi-Tech's patent prevents other firms from using the new technology. Which of the following statements are true about what happens in the short run? Check all that apply. O Hi-Tech's profits increase. O Hi-Tech's marginal-cost curve remains the same. O Hi-Tech's average-total-cost curve shifts downward. O The price of books remains the same