Chapter 57, Problem 1CYU

a)

To determine

Market structure of three producers of aluminum in the world, a good sold in many places.

Explanation of Solution

When there are three producers of aluminum in the world, a good sold in many places would belong to an oligopoly market structure because the oligopoly is a market where a small number of producers exist in the market who sell their goods and services in their market area by interdepending on each other for price and output level policies.

Economics Concept Introduction

Introduction: All firms in a perfectly competitive industry sell identical products and the market share of the firm cannot affect the price.

Many companies or firms are present in the monopolistically competitive industry that sells similar but differentiated products in the market.

In a monopoly, only one firm sells goods and services which are unique or have no substitutes in the market.

In an oligopoly, there are few firms and they experience economies of scale, firms have a price or market power and they need to collude.

b)

To determine

The market structure is when there are thousands of farms that produce indistinguishable soybeans for thousands of buyers.

Explanation of Solution

When there are thousands of farms that produce indistinguishable soybeans for thousands of buyers, this is the market structure of perfect competition. It is a perfectly competitive market structure because the firm is producing identical products in the market where the number of buyers are available who can purchase soybeans.

Economics Concept Introduction

Introduction: All firms in a perfectly competitive industry sell identical products and the market share of the firm cannot affect the price.

Many companies or firms are present in the monopolistically competitive industry that sells similar but differentiated products in the market.

In a monopoly, only one firm sells goods and services which are unique or have no substitutes in the market.

In an oligopoly, there are few firms and they experience economies of scale, firms have a price or market power and they need to collude.

c)

To determine

The market structure when many designers sell high-fashion clothes and each designer has a distinctive style and a somewhat loyal clientele.

Explanation of Solution

The market structure belongs to the monopolistic competition when many designers sell high-fashion clothes and each designer has a distinctive style and a somewhat loyal clientele. It belongs to this market structure because a number of firms or sellers in the fashion industry would sell their differentiated products such as designer clothes to buyers who may be loyal or they have brand faith.

Economics Concept Introduction

Introduction: All firms in a perfectly competitive industry sell identical products and the market share of the firm cannot affect the price.

Many companies or firms are present in the monopolistically competitive industry that sells similar but differentiated products in the market.

In a monopoly, only one firm sells goods and services which are unique or have no substitutes in the market.

In an oligopoly, there are few firms and they experience economies of scale, firms have a price or market power and they need to collude.

d)

To determine

The market structure when a small town in the middle of Alaska has one bicycle shop.

Explanation of Solution

The market structure belongs to a monopoly when a small town in the middle of Alaska has one bicycle shop. This condition would belong to this structure because there is one seller of the bicycle in the market who has monopoly of the area which can be due to uniqueness or there may be no substitute in the market.

Economics Concept Introduction

Introduction: All firms in a perfectly competitive industry sell identical products and the market share of the firm cannot affect the price.

Many companies or firms are present in the monopolistically competitive industry that sells similar but differentiated products in the market.

In a monopoly, only one firm sells goods and services which are unique or have no substitutes in the market.

In an oligopoly, there are few firms and they experience economies of scale, firms have a price or market power and they need to collude.