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 market competitive? Scenario 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. In a college town, students choose between two providers of wireless internet access. All student housing is wired for both companies, and the internet service offered by both providers is equally fast and reliable. Dozens of clothing manufacturers produce plain black undershirts. Consumers view plain black undershirts as identical and have no preference which company makes their undershirts. 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.

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 market competitive? Scenario 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. In a college town, students choose between two providers of wireless internet access. All student housing is wired for both companies, and the internet service offered by both providers is equally fast and reliable. Dozens of clothing manufacturers produce plain black undershirts. Consumers view plain black undershirts as identical and have no preference which company makes their undershirts. 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.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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1. 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, 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 market competitive?
Scenario
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.
In a college town, students choose between two providers of wireless internet access. All
student housing is wired for both companies, and the internet service offered by both
providers is equally fast and reliable.
Dozens of clothing manufacturers produce plain black undershirts. Consumers view plain
black undershirts as identical and have no preference which company makes their
undershirts.
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.

2. The demand curve facing a competitive firm
The following graph illustrates the market for small moving trucks in Bloomington, IN, during Indiana's fall move-in week.
PRICE (Dollars per small truck)
100
90
80
70
60
50
40
30
20
10
0
Demand
0 1
2
3
6
7
8
QUANTITY (Hundreds of small trucks)
4
5
Supply
9 10
?
Suppose that YouYeet is one of over a dozen competitive firms in the Bloomington area that offers moving truck rentals.
Based on the preceding graph showing the weekly market demand and supply curves, the price You Yeet must take as given is $
Fill in the price and the total, marginal, and average revenue YouYeet earns when it rents 0, 1, 2, or 3 trucks during move-in week.
Quantity
(Trucks)
Price
(Dollars per truck)
Total Revenue Marginal Revenue Average Revenue
(Dollars)
(Dollars)
(Dollars per truck)
0
1
2
3
O Marginal revenue curve
O Marginal cost curve
The demand curve faced by YouYeet is identical to which of its other curves? Check all that apply.
Average revenue curve
0
Supply curve
AAA

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