Question

1. Pick a market. Be specific. For example don’t pick the gasoline market, but a more focused market like the retail market for gasoline. Or the wholesale market for gasoline.
   1. How would you characterize its costs. For example:
      1. Large or small fixed costs?
      2. Large or small marginal costs relative to fixed costs?
      3. Given your answers would you expect sells to be large and few of them or small and many of them.
   2. Does this market fulfill each of the requirements for perfect competition?
      1. I doubt any market you choose will meet all of them.
   3. How would you characterize the market if it’s not competitive?

Answer 1

Market chosen - retail market for cars

A) it has large fixed costs. As showrooms are needed to sell the cars.

2)it has small marginal costs relative to fixed costs as once the showroom is ready one additional car will not cost much.

3) since there is huge fixed cost involved and marginal cost is comparatively less, sales are expected to be high.

B)no, it doesn't fulfill all the requirements of perfect competition.

C) the market is more related to oligopoly market than perfect competition. As there are few large firms and price decisions are affected by the price decisions of other firms as well.