Characteristics of competitive markets The model of competitive markets relies on these three core assumptions:

1. There must be many buyers and sellersâa few players can't dominate the market.

2. Firms must produce an identical productâbuyers must regard all sellers' products as equivalent

. 3. Firms and resources must be fully mobile, allowing free entry into and exit from the industry. The first two conditions imply that all consumers and firms are price takers.

While the third is not necessary for price-taking behavior, assume for this problem that a market cannot maintain competition in the long run without free entry.

Identify whether or not each of the following scenarios describes a competitive market, along with the correct explanation of why or why not. Scenario Competitive?

The government has granted the U.S. Postal Service the exclusive right to deliver mail.

There are hundreds of high school students in need of algebra private teachers services in Dallas. Dozens of companies offer private teaching services, and the parents who seek out private teachers view the quality of the at the different companies to be largely the same.

There are hundreds of colleges that serve millions of students each year. The colleges vary by location, size, and educational quality, which enables students with diverse preferences to find schools that match their needs.

A few major airlines account for the vast majority of air travel. Consumers view all airlines as providing basically the same service and will shop around for the lowest price.

First Scenario: The fact that the government has interfere with the market and make it impossible for other companies to operate in there then that market refers to a monopoly where the only seller is the U.S. Postal Service and therefore there can not be another companies selling in the market and that is why it is not a perfect competitive market.

Second Scenario: The fact that there are a lot of buyers and sellers and that the product is perceived as the same and therefore that this one is homogeneous to every consumer makes this market a perfect competitive one.

Third Scenario: The fact that the colleges vary on many variables such as location, size and educational quality makes it impossible to be a competitive market because there is not a homogenoues product but instead the buyers can choose among those colleges due to their differences and needs.

Fourth Scenario: The fact that there are only a few airlines and not many makes it impossible for the market to a be a perfect competitive one and therefore that this market is actually an oligopoly preferently because the buyers will choose mostly by price.