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Consider the following goods and services. Which are the most likely to be produced in a perfectly competitive industry? Which are not? Explain why you made the choices you did, relating your answer to the assumptions of the model of perfect competition. Please address all of the examples below in your discussion.
1. Coca-Cola and Pepsi
2. Potatoes
3. Private physicians in your local community
4. Government bonds and corporate stocks
5. Taxicabs in Lima, Peru—a city that does not restrict entry or the prices drivers can charge
6. Oats
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Chapter 9 explains the model of perfect competition. The competitive model is built with an exposition of underlying assumptions and the graphical representations of short-run and long-run equilibria derived from them. The short-run equilibrium condition, MC = MR, and the addition of ATC = AR for long-run equilibrium are explained. The market supply curves are derived from the individual firms’ supply curves. The text includes examples of the model in operation and discusses its applicability to actual firms.
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