Competitive Markets for Goods and Services

Read this chapter for an explanation of the model of perfect competition, which is crucial to your understanding of the more complicated and realistic models that will be studied next. Take a moment to read through the stated learning outcomes for this chapter of the text, which you can find at the beginning of each section. These outcomes should be your goals as you read through the chapter. Attempt the "Try It" problems at the end of each section.

2. Perfect Competition: A Model

2.2. Answers to Try It! Problems

  1. Not perfectly competitive -There are few sellers in this market (Fedex, UPS, and the United States Postal Services are the main ones in the United States) probably because of the difficulty of entry and exit. To provide these services requires many outlets and a large transportation fleet, for example.
  2. Perfectly competitive - There are many firms producing a largely homogeneous product and there is good information about prices. Entry and exit is also fairly easy as firms can switch among a variety of crops.
  3. Not perfectly competitive - The main reason is that goods are not identical.