Microeconomics
Microeconomics
5th Edition
ISBN: 9781319098780
Author: Paul Krugman, Robin Wells
Publisher: Worth Publishers
Question
Book Icon
Chapter 3, Problem aWYWL
To determine

What is a competitive market?

Concept Introduction:

Competitive market: The competitive market is a market where there is a large number of buyers and sellers in the sellers are profit motive and the buyers want to maximize their satisfaction. In a competitive market, no single product can influence the price of the commodities. If one producer increases the price of his good no one will follow him and the producer may incur losses. In a perfectly competitive market, the firms will be selling a homogenous product.

Expert Solution & Answer
Check Mark

Explanation of Solution

A competitive market is a place where there is a large number of buyers and sellers in the economy. And there are selling almost the homogenous products in the economy, the sellers are profit motive and the buyers want maximum satisfaction from the products. There is a rivalry in the competitive market the actions of one firm affect the decision of another firm so it leads to rivalry in the markets. Another feature of the competitive market is excludability the firms may exclude the consumers from enjoying their good or service for an example the movies are only shown to the persons who buy the movie ticket if there is no excludability the consumers become the free riders. Another feature of the competitive market is the available information is fully reflected in the market, for example, there is a report that hamburger consumption creates more health problems to the people, so due to this report, there will be decreased demand for hamburgers in the market. So the available information is fully reflected in the market. The very important feature of the competitive market is there are no barriers to entry that means firms can enter and leave the market at any time, there is complete freedom of firms to enter or leave the market.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!
Knowledge Booster
Background pattern image
Recommended textbooks for you
Text book image
ENGR.ECONOMIC ANALYSIS
Economics
ISBN:9780190931919
Author:NEWNAN
Publisher:Oxford University Press
Text book image
Principles of Economics (12th Edition)
Economics
ISBN:9780134078779
Author:Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:PEARSON
Text book image
Engineering Economy (17th Edition)
Economics
ISBN:9780134870069
Author:William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:PEARSON
Text book image
Principles of Economics (MindTap Course List)
Economics
ISBN:9781305585126
Author:N. Gregory Mankiw
Publisher:Cengage Learning
Text book image
Managerial Economics: A Problem Solving Approach
Economics
ISBN:9781337106665
Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:Cengage Learning
Text book image
Managerial Economics & Business Strategy (Mcgraw-...
Economics
ISBN:9781259290619
Author:Michael Baye, Jeff Prince
Publisher:McGraw-Hill Education