Consider the following goods and services. Which are the most likely to be produced in a perfectly competitive industry? Which are not? Coca-Cola and Pepsi, potatoes, private physicians in your local community, government bonds and corporate stocks, taxicabs in Lima, Peru—a city that does not restrict entry or the prices drivers can charge—and oats.

In a perfectly competitive market, Coca-Cola and Pepsi would likely not be produced, but potatoes, oats, and corporate stocks could still exist.

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Coca-Cola and Pepsi would not likely be produced in a perfect competition type of market structure. Soda companies do not produce homogenous beverages, nor are soft drink producers price takers. Coca-Cola and Pepsi have distinctive tastes and the companies that make them can determine their respective prices.

Potatoes would likely...

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Coca-Cola and Pepsi would not likely be produced in a perfect competition type of market structure. Soda companies do not produce homogenous beverages, nor are soft drink producers price takers. Coca-Cola and Pepsi have distinctive tastes and the companies that make them can determine their respective prices.

Potatoes would likely be produced in a perfect competition kind of market. Unlike Coca-Cola and Pepsi, one potato, hypothetically, is no different from another potato. As the potato market is influenced by manifold buyers and sellers, it’d be hard for one potato producer to manipulate the price.

Private physicians in a local community would not likely enter a market of perfect competition. Not all physicians are the same, and private physicians can set their own price for the care that they provide.

Government bonds and corporate stocks could be a part of a perfectly competitive market. As the GameStop incident in January 2021 indicates, firms do not have such a firm grasp on how their stock price rises or falls.

As for taxi cabs in Lima, where any driver can enter and charge what they want, that doesn’t seem to qualify as an instance of perfect competition. The cab firms—or the people who drive cabs—can set their own prices.

Finally, when it comes to oats, think about what oats have in common with potatoes and how the similarities would make it amicable to a market of perfect competition.

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