question archive For each of the following scenarios, determine which market model best describes the scenario
For each of the following scenarios, determine which market model best describes the scenario
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For each of the following scenarios, determine which market model best describes the scenario. Then identify the number of firms, the type of product, and the ease with which new firms can enter the market under this market structure.
| Scenario | Number of Firms | Type of Product | Entry | Market Model |
|---|---|---|---|---|
| Many small shops sell different styles of sweaters. Some stores sell higher-quality and more expensive sweaters then other stores. | ||||
| Hundreds of high school students who require tutoring in algebra choose among dozens of tutoring companies offering similar services. | ||||
| Four Internet providers offer similar services to almost everyone in the city. Any new company would have to engage in a price war with the existing companies. | ||||
| Only one pharmaceutical company has a government patent to sell an experimental drug. options: 1. few/many/one 2. differtiated/standard/unique/anything 3. impossible/challenging/easy 4. oligopoly/monopoly/price-taker/price-searcher |
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| Scenario | Number of Firms | Type of Product | Entry | Market Model |
|---|---|---|---|---|
| Many small shops sell different styles of sweaters. Some stores sell higher-quality and more expensive sweaters then other stores. | Many. This market has numerous small shops. | Differentiated. The firms in this market vend differentiated sweaters. | Easy. The presence of many small shops in the market indicates that it is easy for new companies to enter the market. | Price searchers. Shops have some power to determine their prices. |
| Hundreds of high school students who require tutoring in algebra choose among dozens of tutoring companies offering similar services. | Many. This market has dozens of companies. | Standard. All tutoring firms are providing the same services. | Easy. The existence of dozens of tutoring firms shows it is easy for new businesses to enter the market. | price-taker. The companies in this market are trading identical product. Moreover, the companies are many and therefore have no power to set price. They have to accept the price set by the market forces. |
| Four Internet providers offer similar services to almost everyone in the city. Any new company would have to engage in a price war with the existing companies. | Few. There are four companies in this market. | Standard. The firms provide similar internet services. | Challenging. A new business entering the market has to engage in price wars with existing companies. | Oligopoly. There are a few businesses in the market. Price war strengthens the barriers to market entry. |
| Only one pharmaceutical company has a government patent to sell an experimental drug. | One. There is only one pharmaceutical company. | Unique. No other companies are providing the experimental drug. | Impossible. The government has allowed only one company to operate. | Monopoly. There is only one pharmaceutical company in the market. |
