What makes a competitive market? This chapter lists six characteristics for a competitive market that can help an economy achieve the virtues of competition. The six characteristics are: a) Many firms
b) Identical products
c) MC = p
d) Low barriers to entry
e) Zero economic profit
f) Perfect information However, these characteristics don't always occur. Pick a market for a good or service with which you are familiar (for example, college textbooks or car insurance—but don't use these examples). Be sure you select a good or service produced by firms operating to make a profit. Don't pick something produced by the government or a non-profit firm. 1) | In the market you selected, which of these six characteristics is present? | | | 2) | Which of the characteristics is absent? | | | 3) | Pick one of the absent characteristics. Provide evidence to support your judgment that it is missing. | | | 4) | For one of the absent characteristics you identified in (2), describe a government policy to remedy the shortcoming, so that more of the virtues of competition could be achieved. Explain why production would be more efficient and why there would be a more optimal mix of output. |
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