Chapter 10, Problem 1DQ

Subpart (a):

To determine

The market structure.

Explanation of Solution

A hometown supermarket is an oligopoly market because supermarkets are few in the economic market and the size of the market makes it difficult to make a new entry and one which is non price competition. This is because there is much competition in the market as they compete for market share and there is no collusion and some of the areas behave like a monopolistic market.

Economics Concept Introduction

Concept introduction:

Pure competition: Perfect competition refers to the market structure which features more number of sellers and buyers in the market and the firm can sell homogenous products.

Pure monopoly: Monopoly refers to the market structure with the features of a single seller and more buyers.  Firms have full control over the market. Price is fixed by the monopoly producer. There is a restriction for entry of the firm. Hence, there are no substitute goods available in the market.

Monopolistic competition: Monopolistic competition refers to the market structure with the feature of more firms producing differentiated goods. These goods are called substitute goods: but they are not perfect substitutes. There is no restriction to enter the business. Firms are price makers.

Oligopoly: Oligopoly refers to the market structure which features few sellers and more buyers. Oligopoly firms produce homogenous goods and are competing with themselves, but there is no price competition. There is no easy entry in to the market due to huge investment. Information about the market is unavailable.

Subpart (b):

To determine

The market structure.

Explanation of Solution

In a domestic production market, the steel industry is an oligopoly because there are a small number of firms and the products are standardized. The size makes it difficult for new entries and there is non- price competition and no collusion.

Economics Concept Introduction

Concept introduction:

Pure competition: Perfect competition refers to the market structure which features more number of sellers and buyers in the market and the firm can sell homogenous products.

Pure monopoly: Monopoly refers to the market structure with the features of a single seller and more buyers.  Firms have full control over the market. Price is fixed by the monopoly producer. There is a restriction for entry of the firm. Hence, there are no substitute goods available in the market.

Monopolistic competition: Monopolistic competition refers to the market structure with the feature of more firms producing differentiated goods. These goods are called substitute goods: but they are not perfect substitutes. There is no restriction to enter the business. Firms are price makers.

Oligopoly: Oligopoly refers to the market structure which features few sellers and more buyers. Oligopoly firms produce homogenous goods and are competing with themselves, but there is no price competition. There is no easy entry in to the market due to huge investment. Information about the market is unavailable.

Subpart (c):

To determine

The market structure.

Explanation of Solution

Wheat farms are pure competition in the market because there are a number of similar farms and the products are standardized. Also, there is no control over the price and no non-price competition. Since the cost of acquiring land from a present proprietor is large, entry is difficult.

Economics Concept Introduction

Concept introduction:

Pure competition: Perfect competition refers to the market structure which features more number of sellers and buyers in the market and the firm can sell homogenous products.

Pure monopoly: Monopoly refers to the market structure with the features of a single seller and more buyers.  Firms have full control over the market. Price is fixed by the monopoly producer. There is a restriction for entry of the firm. Hence, there are no substitute goods available in the market.

Monopolistic competition: Monopolistic competition refers to the market structure with the feature of more firms producing differentiated goods. These goods are called substitute goods: but they are not perfect substitutes. There is no restriction to enter the business. Firms are price makers.

Oligopoly: Oligopoly refers to the market structure which features few sellers and more buyers. Oligopoly firms produce homogenous goods and are competing with themselves, but there is no price competition. There is no easy entry in to the market due to huge investment. Information about the market is unavailable.

Subpart (d):

To determine

The market structure.

Explanation of Solution

Commercial banks are in a monopolistic competition because there are many similar banks, the services are differentiated, and there is price control mostly in interest. Entry in the market is easy and there is much advertisement. Not every bank fits in the description of the monopolistic market; some smaller places act as a monopoly or an oligopoly.

Economics Concept Introduction

Concept introduction:

Pure competition: Perfect competition refers to the market structure which features more number of sellers and buyers in the market and the firm can sell homogenous products.

Pure monopoly: Monopoly refers to the market structure with the features of a single seller and more buyers.  Firms have full control over the market. Price is fixed by the monopoly producer. There is a restriction for entry of the firm. Hence, there are no substitute goods available in the market.

Monopolistic competition: Monopolistic competition refers to the market structure with the feature of more firms producing differentiated goods. These goods are called substitute goods: but they are not perfect substitutes. There is no restriction to enter the business. Firms are price makers.

Oligopoly: Oligopoly refers to the market structure which features few sellers and more buyers. Oligopoly firms produce homogenous goods and are competing with themselves, but there is no price competition. There is no easy entry in to the market due to huge investment. Information about the market is unavailable.

Subpart (e):

To determine

The market structure.

Explanation of Solution

Automobile industries are an oligopoly because there are three big automakers in a market, the products are differentiated, and their size makes it difficult for new entries. There is also a lot of non-price competition; it does not appear to have no collusion and there is little price competition. Thus, imports make the industry more competitive and reduce the market power of US automakers.

Economics Concept Introduction

Concept introduction:

Pure competition: Perfect competition refers to the market structure which features more number of sellers and buyers in the market and the firm can sell homogenous products.

Pure monopoly: Monopoly refers to the market structure with the features of a single seller and more buyers.  Firms have full control over the market. Price is fixed by the monopoly producer. There is a restriction for entry of the firm. Hence, there are no substitute goods available in the market.

Monopolistic competition: Monopolistic competition refers to the market structure with the feature of more firms producing differentiated goods. These goods are called substitute goods: but they are not perfect substitutes. There is no restriction to enter the business. Firms are price makers.

Oligopoly: Oligopoly refers to the market structure which features few sellers and more buyers. Oligopoly firms produce homogenous goods and are competing with themselves, but there is no price competition. There is no easy entry in to the market due to huge investment. Information about the market is unavailable.