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Describe an industry that would meet the conditions of a perfectly competitive industry which are

a) There are many buyers and sellers so neither side of the market has market power;

b) The product provided to the market is identical across suppliers; and

c) There are no barriers to entry.

How do individual firms in a perfectly competitive industry respond to an increase in the market demand for the product? Would advertising by individual firms in this type of market provide any benefits?

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Anne Gillian Duero
Anne Gillian DueroLv10
28 Sep 2019
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Related questions

What are the three conditions for a market to be perfectly competitive? For a market to be perfectly competitive, there must be:

A. many buyers and one seller, with the firm producing a product that has no close substitutes, and barriers to new firms entering the market.

B. many buyers and sellers, with firms selling similar but not identical products, with low barriers to new firms entering the market

C. many buyers and a few sellers, with all firms selling identical products, and no barriers to new firms entering the market.

D. many buyers and sellers, with all firms selling identical products, and no barriers to new firms entering the market.

E. many buyers and a small number of firms that compete, selling differentiated products, and barriers to new firms entering the market.

What conditions make a market perfectly competitive? A market is perfectly competitive if:Ā 
Ā 
(i) it has many buyers and one firm, which produces a product with no close substitutes, with barriers to new firms entering the market.Ā 
(ii) it has many buyers and many sellers, all of whom are selling differentiated products, with no barriers to new firms entering the market.Ā 
(iii) it has many buyers and a few sellers, all of whom are selling identical products, with no barriers to new firms entering the market.Ā 
(iv) it has many buyers and a few sellers, all of whom are selling differentiated products, with barriers to new firms entering the market.Ā 
(v) it has many buyers and many sellers, all of whom are selling identical products, with no barriers to new firms entering the market.

Which of the following is not characteristic of a perfectly competitive market?

A. There are many buyers and many sellers
B. Firms are price-takers
C. There are no barriers to entry
D. Firms advertise in order to distinguish their products and increase market share

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