Question

2

2. Market structures

For each of the following scenarios, identify the number of firms present, the type of product, and the appropriate market model. Select the matching entry for each dropdown box in the following table.

Scenario	Number of Firms	Type of Product	Market Model
A large city has lots of small shops where people can buy sweaters. Each store's sweaters reflect the style of that particular store. Additionally, some stores use higher-quality yarn than others, which is reflected in their price.
There are hundreds of high school students in need of algebra tutoring services. Dozens of companies offer tutoring services; parents view the quality of the tutoring at the different companies to be largely the same.
In a large city, two taxi companies own all the licenses that the city will grant to operate taxis. Consumers don't care which cab company they take—if they decide it's worth taking a cab, they flag down the nearest one.
A publishing company owns the U.S. copyright to a popular series of books. It is the only company with the legal right to publish these books in the United States.

Answer 1

Scenario- A large city has lots of small shops where people can buy sweaters. Each store's sweaters reflect the style of that particular store. Additionally, some stores use higher-quality yarn than others, which is reflected in their price.

Market structure- Monopolistically competitive market. A monopolistically competitive market consists of a large number of sellers of a particular product, with each seller selling somewhat differentiated product but close substitutes to the product sold by other sellers. As each store's swweaters reflect the style of that particular store, each seller has differentiated product.

Number of firms-There are a large number of firms in a monopolistically competitive market.

Type of product-Products sold by monopolistically competitive firms are similar. They are close substitutes of each other but not perfect substitutes.

Scenario- There are hundreds of high school students in need of algebra tutoring services. Dozens of companies offer tutoring services; parents view the quality of the tutoring at the different companies to be largely the same.

Market structure- Perfectly competitive market. A perfectly competitive market structure in which there are a large number of producers producing a homogenous product.

Number of firrms- Number of firms is large. In a perfectly competitive market, the number of firms producing the product is large. As  dozens of companies offer tutoring services, the number of firms is large.

Type of product- Product sold by perfectly competitive firms is identical. They are close substitutes of each other's product. Hence, buyers view each producers product to largely to be the same. As parents view the quality of the tutoring at the different companies to be largely the same, the product sold is identical or homogenous.

Scenario-In a large city, two taxi companies own all the licenses that the city will grant to operate taxis. Consumers don't care which cab company they take—if they decide it's worth taking a cab, they flag down the nearest one.

Market structure- Oligopoly market. It is that form of market structure in which there are a few firms selling a product so that there is intense competiton among them. When number of firms is two or ten, it is a situation of oligopoly market. Here, there are two taxi companies , hence constitiute an oligopoly market.

Number of firms- In an oligopoly market, number of firms is two to ten. Here in the given scenario, there are two taxi companies.

Type of product- The type of product sold by these two taxi companies is without product differentiation. As consumers don't care which cab company they take, it indicates that this oligopoly market is "oligopoly without product differentiation".

Scenario-A publishing company owns the U.S. copyright to a popular series of books. It is the only company with the legal right to publish these books in the United States.

Market structure- Monopoly market. A monopoly market is a market structure in which there is a single seller of the product who is the sole producer of the product which has no close substitutes. As the publishing company is the only company with the legal right to publish the books, it is a monopoly.

Number of firms- Number of firms in a monopoly market is one. There is only a single seller of the product.

Type of product- The product sold by monopoly market has no close substitutes.