Two different questions
Chapter 15 Homework 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 th 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 Is the market competitive? In a large city, one chain of coffee shops controls a large market share because locals believe its coffee tastes better than that of its competitors. The government grants a patent to a pharmaceutical company protecting an experimental cancer treatment. That company is the only pharmaceutical producer allowed to manufacture and sell the treatment. Yes, satisfies all assumptions No (no free entry) In a college town, students choose between two providers of wireless internet access. All No (not many sellers) student housing is wired for both companies, and the internet service offered by both providers is equally fast and reliable No ( not an identical product Dozens of clothing manufacturers produce plain black undershirts. Consumers view plain black undershirts as identical and have no preference which company makes their undershirts. MacBook Air 1 *

Question

Two different questions

Chapter 15 Homework 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 th 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 Is the market competitive? In a large city, one chain of coffee shops controls a large market share because locals believe its coffee tastes better than that of its competitors. The government grants a patent to a pharmaceutical company protecting an experimental cancer treatment. That company is the only pharmaceutical producer allowed to manufacture and sell the treatment. Yes, satisfies all assumptions No (no free entry) In a college town, students choose between two providers of wireless internet access. All No (not many sellers) student housing is wired for both companies, and the internet service offered by both providers is equally fast and reliable No ( not an identical product Dozens of clothing manufacturers produce plain black undershirts. Consumers view plain black undershirts as identical and have no preference which company makes their undershirts. MacBook Air 1 *