**The Model of Competitive Markets** The model of competitive markets relies on the following four core assumptions: 1. **Many Buyers and Sellers**: There must be many buyers and sellers, none of which is large in relation to total sales or purchases. In other words, a few players can't dominate the market. 2. **Homogeneous Products**: Each firm produces and sells a homogeneous product that is indistinguishable from all other firms' products in a given industry. That is, buyers must regard all sellers' products as equivalent or identical. 3. **Perfect Information**: Buyers and sellers have all relevant information about prices, product quality, sources of supply, etc. 4. **Free Market Entry and Exit**: Firms have free entry into and exit from the industry. New firms can enter the market easily, and existing firms can exit the market easily. There are no barriers to entry or exit. The first three assumptions imply that all consumers and firms are price takers. The final assumption is not necessary for price-taking behavior but guarantees that a market remains competitive in the long run. **Educational Website Transcription** --- **Topic: Perfect Competition** **Aplia Homework: Perfect Competition** To understand perfect competition, the following conditions must be met: 1. Buyers must regard all sellers' products as equivalent or identical. 2. Buyers and sellers have all relevant information about prices, product quality, sources of supply, etc. 3. Firms have free entry into and exit from the industry. New firms can enter the market easily, and existing firms can exit the market easily. There are no barriers to entry or exit. These first three assumptions imply that all consumers and firms are price takers. The final assumption is not necessary for price-taking behavior, but guarantees that a market remains competitive in the long run. **Task: Identify whether or not each of the following scenarios describes a perfectly competitive market, along with the correct explanation of why or why not.** **Scenarios:** - 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. - 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. - Dozens of companies produce plain white socks. Consumers regard plain white socks as standardized and don’t care who manufactures their socks. **Options:** - A dropdown menu is provided next to each scenario for selecting whether the scenario is "Perfectly competitive" or not. **Action Buttons:** - "Grade It Now" button for immediate grading. - "Save & Continue" button to save progress and continue. - "Continue without saving" option for proceeding without recording the saved information. --- This educational exercise aims to help students analyze different market scenarios to understand the concept of perfect competition better.