Chapter 11R, Problem 1CTQ

To determine

The markets in local economy that closely relates to the Adam Smith’s deal perfect competition market structure.

Explanation of Solution

.The firm that follows perfect competition type market structure must possess following traits:

• Exactly similar products are sold in the market.
• They are price takers as they sell identical products.
• Consumers possess all information about the product, price and the quality that is offered by the firm.
• Firm can easily enter the market and exit is easy in these firms.
• Market share of these firms has low or negligible significance.

Following markets in local economy are similar to ideal perfect competition:

• Seller that sells vegetables, eggs, etc. These products are similar and are usually sold at similar prices.
• Secondly, gas stations at which fuel are sold at same price to all customers.

Economics Concept Introduction

Perfect competition: In perfect competition type of market structure, the firms sell similar products and are the price takers as if any of the firm does not sell the similar product at the similar price then it may not stay longer in the market competition.