Question

What are the indicators that the US agricultural industry is competitive? How is a competitive market defined?

Answer 1

A competitive market is defined as the market which has the following characteristics:

1) A large number of buyers

2) A large number of sellers

3) All sellers selling an identical good

4) Each seller captures a very small fraction of the market

5) No buyer or seller control the market price; therefore, buyers and sellers are all price takers.

The US agricultural industry is a competitive market as it has a large number of buyers and sellers. Also, the buyers and the sellers are all price takers as they need to accept the prevalent market price. Moreover, the products sold by the agricultural producers are nearly identical. Each producer captures a very small segment of the market. Therefore, the US agricultural market has many characteristics of a competitive market.