Question

No matter how many soft drinks you buy, you have no effect on the price of soft drinks. The soft drink industry includes two very large producers and several smaller ones. Is this industry perfectly competitive? Explain your answer.

Answer 1

one has to understand in a perfectly competitive industry is that the product has to be homogeneous and in the case of soft drinks the product is in homogeneous and or no matter what the price is unless the product is homogeneous the market doesn't qualified to be a perfectly competitive market and also part from that when you consider the HHI index, you can also say that there is certain level of brand loyalty as well as market share involved here and this makes a soft drink industry not a perfectly competitive industry as there are even certain barriers to entry for new entrant into the market.