Question

Explain why each of the following examples is not a perfectly competitive industry.

a. One firm produces a large portion of the industry's total output, but there are many firms in the industry, and their products are indistinguishable. Firms can easily exit and enter the industry.

b. There are many buyers and sellers in the industry. Consumers have equal information about the prices of firms' products, which differ moderately in quality from firm to firm.

c. Many taxicabs compete in a city. The city's government requires all taxicabs to provide identical services. Taxicabs are nearly identical, and all drivers must wear a designated uniform. The government also enforces a binding limit on the number of taxicab companies that can operate within the city's boundaries.

Short answer

(a) In competitive markets, firms sell similar products, and one firm cannot deliver more because each firm contributes equally to total yield.

(b) Once the item animating principle of a manufacturing self destructs, it continues to suffer economic damage and therefore is compelled out from the business.

(c) In the perfect competition, there is the opportunity for section and exit.

Step-by-step solution

Introduction

The perfect competition is a sort of unrestricted economy where there is the opportunity for passage and exit. Industries sell similar products. The essential attributes of perfect competition are, that there are numerous dealers and purchasers in the economy.

Explanation (Part a)

When a company creates a critical component of the overall result of the business while having many firms in the business whose items are unclear can't be a perfectly serious predicament.

In competitive equilibrium, firms sell relevant ones, and one firm cannot deliver more because each firm contributes equally to total yield.

Explanation (Part b)

Purchasers have similar data about the company's item costs that contrast respectably in quality from one firm to another can't be a perfectly serious circumstance as in perfect competition, firms are creating indistinguishable items which don't shift every now and then.

If the item nature of a manufacturing declines, it will experience loss and just be completely removed first from economy.

Explanation (Part c)

This can't be a perfect competition on the grounds that is happening the public authority sets a limiting boundary for the number of taxi organizations that can work inside the city limits.

In the perfect competition, there is the opportunity of section and exit.