The model of competitive markets relies on these 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 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. Scenario Competitive? Dozens of companies produce plain white socks. Consumers regard plain white socks as identical and don't care who manufactures their socks. Yes, meets all assumptions No, no free entry The government has granted a patent to a pharmaceutical company for an experimental AIDS drug. That company is the only firm permitted to sell the drug. No, not many sellers No, not an identical product Several stores in the mall sell hooded sweatshirts. Each store's sweatshirts reflect the style of that particular store. Additionally, some makers use higher-quality cotton than others, which is reflected in the apparel's prices.

Fill in the table by the main characteristics of the competitive markets. Criteria: Pure and perfect competition Imperfect competition Monopolistic competition Oligopoly Monopoly Number of sellers Number of buyers Type of the commodity Price control Barriers of entry to the market Access to the market information Examples of real production markets

1. Characteristics of competitive markets The model of competitive markets relies on these 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. Scenario There are hundreds of colleges that serve millions of students each year. The colleges vary by location, size, and educational quality, which enables students with diverse preferences to find schools that match…

Assume that banana squash is traded in a perfectly competitive market in which the demand curve captures buyers' full willingness to pay while the supply curve reflects all production costs. For each of the following situations, indicate whether the total output should be increased, decreased, or kept the same in order to achieve allocative and productive efficiency. The maximum willingness to pay exceeds minimum acceptable price. ( increased, decreased, or kept the same) Marginal Benefit. ( increased, decreased, or kept the same) а. く-- Choose a correct answer! Total surplus is at a maximum. ( increased, decreased, or kept the same) <-- Choose a correct answer! С. d. The current quantity produced exceeds the market equilibrium quantity. ( increased, decreased, or kept the same) <--Choose a correct answer! Blank # 1 Blank # 2 Blank # 3 Blank # 4

The model of competitive markets relies on these 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.

Q2. Cournot Model (production competition model) Consider a Cournot model. The market demand is p=180-q1-q2. The marginal cost for both firms is 30 and there are no fixed costs. A. Derive each firm's best response function. B. Find the Nash equilibrium. C. Find the equilibrium price and each firm's profit. D. Find the consumer surplus and the social welfare at equilibrium.

Homework (Ch 14) 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 th 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. Scenario Competitive? 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. Several stores in the mall sell hooded sweatshirts. Each store's sweatshirts reflect the style of that particular store.…

Recently, the Obama administration proposed a $1.00 per unit (pack) excise tax on cigarettes (which would be imposed legally or statutorily on cigarettes sellers). Some news reports have suggested that the proposed tax would increase cigarettes prices by $1.00 per pack and be paid by smokers (cigarette buyers). Using (separate) competitive supply and demand diagrams of the cigarettes market carefully show and explain TWO extreme demand and supply conditions under which these news reports would be true?

PLEASE ANSWER QUESTION 4

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