Question

In: Economics

In each blank below, write the one of the four market environments that is most accurately...

In each blank below, write the one of the four market environments that is most accurately being described by each situation: perfect competition, monopolistic competition, oligopoly, or monopoly.

            a) Carcinocillin is a brand new powerful anti-stroke drug with a patent. It is a unique product with no close substitutes.   

                        ____________________________________________________

            b) Ron’s Farmers Market is in the agricultural industry with no barriers to entry, competing with more than 5,000 other farmers’ markets, each one producing the exact same type of wheat.

                        ____________________________________________________

           

            c) Alternative Products produces a key input that is used in automobile manufacturing.The firm is quite large and notices that every time it changes its advertising strategy, its three other rivals soon follow suit by changing their strategy.

                        ____________________________________________________

            d) Lexington Ice Cream has a Lerner Index that is very close (but NOT equal) to zero.   

                        ____________________________________________________

Solutions

Expert Solution

a) Carcinocillin is a brand new powerful anti-stroke drug with a patent. It is a unique product with no close substitutes. MONOPOLY, The firm is selling unique product which has no close substitute and is a single seller in the market.

b) Ron’s Farmers Market is in the agricultural industry with no barriers to entry, competing with more than 5,000 other farmers’ markets, each one producing the exact same type of wheat. PERFECT COMPETITION, large no of buyers and sellers selling homogeneous product.

c) Alternative Products produces a key input that is used in automobile manufacturing.The firm is quite large and notices that every time it changes its advertising strategy, its three other rivals soon follow suit by changing their strategy. OLIGOPOLY, There are few large sellers in the market who follows each other in price strategy in order to not lose market share.

d) Lexington Ice Cream has a Lerner Index that is very close (but NOT equal) to zero. MONOPOLISTIC COMPETITION, Some control over price and market power, which is characterised by MONOPOLISTIC competitive firm selling differentiated products

Rahul Sunny answered 1 year ago
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