Share
Explore BrainMass

Managerial Economics- Give an example of a good or service market that is close to perfectly competitive, and then defend your choice

1. Give an example of a good or service market that is close to perfectly competitive, and then defend your choice. (Us tobacco for service market)

2. What types of industries does TRA (Tennessee Regulatory Authority) regulate? Choose a company that would fall within one of those industries. Why is this firm (and others within the industry) regulated?

3. Which characteristics of monopoly apply to the firm you have chosen?

Solution Preview

Give an example of a good or service market that is close to perfectly competitive, and then defend your choice.

A condition where a good or service is defined as close to perfect competition implies that neither firms nor consumers have any control or influence on the prices. Prices are normally set based on supply and demand in the marketplace (Machovec, 1995). An example of a good that is close to perfect competition is corn (agricultural product), which is a staple good or commodity. There are a number of important reasons why corn can be considered in position of perfect competition. Let's look at the main reasons:

1. Little Difference. All corn growers produce the exact same identical product. There is no difference between corn grown in Brazil and that grown in China. Therefore, growers cannot alter the product to make it better or worse than other competitors.

2. Price-Takers. Companies cannot intentionally increase the price of corn because such a move will not have any effect on the market. For example, if company A decides to increase price of corn from $100 per ton to $150 per ton, the product is so readily available in the wider market that there will always be a cheaper supplier elsewhere. Due to low entry barriers, there is enormous competition, ensuring any change by one company will have no effect on the overall market price.

3. Small Market Share. As there are so many corn growers in the world, each has a relatively small market share. Having small market share ensures that no one company can move the market or have any effect on the overall market.

4. ...

Solution Summary

The expert examines service markets for perfectly competitive managerial economics. The characteristics of monopoly applying to the firm is determined.

$2.19