Question

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

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

Answer 1

Answer:

Yes the scenario describes a competitive market

Explanation:

There are 3 factors of a competitive market that stands out in the given scenario which are:

1. Many Buyers and Sellers: In the given scenario it mentions clearly that ''There are hundreds of colleges that serve millions of students each year''. Hence it is very clear that the buyers which are (in this scenario) the students, and the sellers who are the (in this scenario) the colleges; are many.

2. Perfect Information: A competitive market is characterized by the availability of information about the products in offer. In the given scenario, it suggests clearly that the availability of information ''allows students with diverse preferences to find schools that match their needs''. This could not have been possible if the students did not have perfect information about the colleges.

3. Identical products: Another feature of a competitive market is the availability of identical products. In the given scenario, it states clearly that ''The colleges vary by location, size, and educational quality''. Other than these features the colleges are offering basically the same product which is education.