Question

For each of the following, is the industry perfectly competitive? Referring to market share, standardization of the product, and/or free entry and exit, explain your answers in detail.

Aspirin

Alicia Keys Concerts

SUVs

Also, come up with your own example of a competitive market. What would you expect to happen to profits in this market over time (short-run versus long-run outcomes in perfect competition)? Explain the competitive process in detail.

Can You please answer this with good detail

Answer 1

Answer:

(1). Yes, Aspirin industry is perfectly competitive. Because many manufacturers are produced aspirin and the product is a standardized product. There has no barrier to entry or exit in this industry, so new manufacturers can easily enter and exit the industry.

Bruno Mars Concerts:

No, Bruno Mars Concerts is not perfectly competitive. Because there have only one Bruno Mars Concerts and there is not free entry into the industry.

SUVs:

No, SUVs is not perfectly competitive. A few manufacturers of SUVs and each of the manufactures hold a large market share. SUVs are not a standardized product.

(2). A neighborhood fast food joint is part of a competitive market. There are numerous fast food joints in a market with many buyers. All food joints sell almost identical goods and there is no entry or exit barrier.

High level of competition ensures that each firm accepts a price that is market-determined and cannot set its own price.

In the short run, the firms earn the positive economic profit. But since entry is free, new firms are attracted by the positive economic profit and enter the market. This lowers the output of each firm while increasing market supply, which lowers market price. As a result firm profits decrease and the process continues until in the long run, each firm earns zero economic profit such that for each firm, price, average total cost, and marginal cost are equal.