Which of the following goods and services are the most likely to be produced in a perfectly competitive industry? Which are not? 1. Coca-Cola and Pepsi 2. Potatoes 3. Private physicians in your local community 4. Government bonds and corporate stocks 5. Taxicabs in Lima, Peru—a city that does not restrict entry or the prices drivers can charge 6. Oats.

Expert Answers

An illustration of the letter 'A' in a speech bubbles

The "model of perfect competition" includes a list of requirements that must be met for a state of "perfect" (or "pure") competition to exist. The list expands or contracts according to various sources, but, in general, includes the following requirements:

  • Competing firms offer an identical, or nearly identical, product
  • The market operates according to capitalist, free market principles, meaning there is no impediment to competition and consumers enjoy equal access to competing firms' products
  • There are more than two competitors
  • Government involvement in the marketplace is limited or nonexistent
  • Outside variables that can influence prices are nonexistent

As noted, different sources list more requirements for a state of perfect competition, and there are variations in how these requirements are articulated, but the underlying principles remain consistent. A theoretical picture of perfect competition is presumed to exist when these requirements are met.

With this in mind, we can now examine...

(The entire section contains 1355 words.)

Unlock This Answer Now

Start your 48-hour free trial to unlock this answer and thousands more. Enjoy eNotes ad-free and cancel anytime.

Start your 48-Hour Free Trial
Approved by eNotes Editorial Team