Which of these are perfectly competitive markets?

Question

a. corn farming
b. retail bookselling
c. manufacturing automobiles
d. constructing new homes

There can be more than one answer, I think its just a if im not mistaken?

Answer 1

Oh dear Lord, please tell me you did not go with one of those answers.

Let me give you a textbook definition:

Perfectly Competitive Markets:
"Market with many buyers and sellers, so that no single buyer OR seller has a significant impact on price...most agricultural markets are close to being perfectly competitive."

When you have a product with no distinguishing characteristics, such as corn, then the market ends up setting the price by how much supply is on the market compared to the demand. That means sellers on commodity markets are "price takers." One corn farmer cannot say, that while his corn husk is more expensive, it comes with a sunroof or granite counter tops. Holding the quality of corn constant, there is no difference between corn from one farmer or another. And when it comes to price, if one corn farmer prices his crop below another, he will just sell it all at a lower price than his competitors. Because there are so many suppliers, the lowering of price by one is not enough to lower the overall market price.

However, if GM slashes prices on its trucks, then other manufactures will have to respond by either lowering their prices or offering more (in terms of service, features, quality, etc.) in order to keep from losing sales. ...for example.

It has nothing to due with barriers to entry, subsidies, zoning, etc.

Answer 2

retail bookselling is likely the best answer because there is a low cost of entry to open a bookstore and its easy to get a large supply of books to start the business. There are no monopolies, regulations or tarrifs to start such a business.

Corn farming is restricted both by regulation and by subsidy laws. A farmer cant grow all the corn he wants to (really! its crazy, but true). Also the cost is usually often fixed due to heavy subsidy by the government.

Autos have a very high barrier to entry because it costs a lot of money to purchase capital to bsuild cars (steel, workers, overhead, plastics, etc)

new homes comes close to being a perfectly competitive market, but it is still restricted in sevral ways. First, most places (with the exception of Huston TX) have zoning restrictions. Secondly there is still a high barrier to entry because it costs a lot to build even a single residential home ($100,000+). Finally, new home construction in the real world today often involves the creation of real covenants and other legal restrictions on the land before anything is even built in contract law, this means that what is built on the land and what can be built later on the land is often restricted by contract.

Answer 3

Whay you opt for to ask is what are the traits of ideal competition? the significant clue is fee. In aggressive markets the producer is a fee taker. Farmers do no longer haggle over fee, they take their corn to the elevator and get the market fee. A 2d clue is that if the product is homogenous. automobiles are all diverse, so are CD's and denims. Granted there are diverse forms of corn yet corn is corn. finally, a truly aggressive market has a great number of manufacturers..yet another signal of a organic competition. there are thousands of farms. you may also tell a organic aggressive market via the inability of merchandising.

Answer 4

It's not a, corn farming is heavily subsidized.

B is valid

C is limited by steel tariffs

D is limited by zoning