Why each of the following examples do not match the nature of a perfectly competitive industry? a) One firm produces a large portion of the industry’s total output. However, there are many firms in the industry and their products are indistinguishable. Firms can easily exit and enter the industry. b) There are many buyers and sellers in the industry. Consumers have equal information about firm’s product prices which differ moderately in quality from firm to firm. c) Many taxi cabs compete in a city. The city’s government requires all taxi cabs to provide an identical service. Taxi cabs are nearly identical and all drivers must wear designated uniforms. The government also enforces a binding limit on the number of taxi cab companies that can operate within the city boundaries.

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Chapter 23, Problem 1P

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Why each of the following examples do not match the nature of a perfectly competitive industry?

a) One firm produces a large portion of the industry’s total output. However, there are many firms in the industry and their products are indistinguishable. Firms can easily exit and enter the industry.

b) There are many buyers and sellers in the industry. Consumers have equal information about firm’s product prices which differ moderately in quality from firm to firm.

c) Many taxi cabs compete in a city. The city’s government requires all taxi cabs to provide an identical service. Taxi cabs are nearly identical and all drivers must wear designated uniforms. The government also enforces a binding limit on the number of taxi cab companies that can operate within the city boundaries.

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