ECONOMICS
COMPETITION AND MARKET STRUCTURES
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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A book seller freely exits the market
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A farmer sells eggs, fruits, and vegetables
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Buyers receive enough information to make educated buying choices
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Ice cream sellers join together to influence the price of ice cream sundaes
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Detailed explanation-1: -Imperfect competition often exists as a result of extremely high barriers to entry for new suppliers. For example, the airline industry has high barriers to entry due to the extremely high cost of aircraft.
Detailed explanation-2: -Market structures that are categorized as imperfect include monopolies, oligopolies, monopolistic competition, monopsonies, and oligopsonies.
Detailed explanation-3: -Imperfect competition can lead to a price greater than marginal cost and thus generate an inefficient allocation of resources. Firms in an imperfectly competitive market may advertise heavily.
Detailed explanation-4: -Imperfect competition exists whenever a market, hypothetical or real, violates the abstract tenets of neoclassical perfect competition. In this environment, companies sell different products and services, set their own individual prices, fight for market share, and are often protected by barriers to entry and exit.