Question

In: Economics

In chapter 12, you learned one of the most fundamental types of market structure – perfect...

In chapter 12, you learned one of the most fundamental types of market structure – perfect competition. Consider the following industries and discuss which industries could suit best into the category of perfect competition.

Fruit industry

Laptop industry

Airline industry

Yogurt industry

Solutions

Expert Solution

The industries that could best suited into the category of perfect competition is fruit industry and yogurt industry.

Following are the reasons -

1. Perfect competition is characterized by the presence of large number of sellers and buyers. Both fruit industry and yogurt industry are also characterized by the presence of large number of sellers and buyers.

2. Perfect competition is characterized by the presence of identical product that is each firm sells identical product in perfect competition. Similar is the case with fruit industry and yogurt industry. Apple sold by one firm is identical to the apple sold by the another firm. Same is with the firms in yogurt industry.

3. In perfect competition, buyers and sellers are assumed to have perfect information regarding price and market conditions. In similar sense, buyers and sellers in both fruit industry and yogurt industry has most of the information regarding price and market condition. Due to this, price charged by various firms in both industries is mostly similar.

4. Perfect competition is characterized by the free entry and exit of firms. Fruit industry and yogurt industry are also industries with almost no barriers to entry and exit for firms. Any new firm can enter these industries or any existing firm can exit these industries without much restrictions.


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