The Process of Deciding on Commodities for Perfect Competitive Market Structure
The process of deciding on which commodity(s) would be produced under perfect competitive market structure requires consideration of key characteristics of the market relevant to this question. The features include one, the goods must be homogeneous. Second, there must exist very many firms in the market - too many to measure due having no barriers to entry (Stiglitz and Rosengard 114). In this regard, beer and cars are eliminated. Regardless of the fact that automobiles perform an almost similar task, they are never identical in buyer's perspective. Automobiles can be branded, therefore, does not fall under this market. On the other hand, people have different taste for beer implying that there exist several brands of beer. Moreover, diamonds are not all similar, an indication that diamonds sold in one market can vary in quality and thus buyers have different preferences for the available firms. Besides, there can not exist an infinite number of firms producing diamonds.
The Two Remaining Commodities: Eggs and Corn
The two remaining commodities (eggs and corn) satisfy the two conditions of homogeneity and possibility of an infinite number of sellers. However, eggs can be grade depending on the condition the layers are maintained while corn is simply corn (Support for Student Success Organization 195). Moreover, the chances of having several firms producing corn are higher as compared to having small-scale egg-producing companies. In addition, consumers are generally aware of the prices in the corn market and thus the firms receive the market price rather than their own. For instance, if corn is cheaper in Brazil, other countries will import from Brazil and thus normalize the prices in the global market. However, egg price varies depending on the producer and indication that corn is the perfect match for a competitive market.
Work Cited
Stiglitz, Joseph E., and Jay K. Rosengard. Economics of the Public Sector: Fourth International Student Edition. WW Norton " Company, 2015.
Support for Student Success Organization. “What is Perfect Competition?” 2018. Support for studentsuccess.org. Pdf. 23 April 2018. <http://supportforstudentsuccess.org/home/CA49709536914667/.blogs/post18454/Chapter%207%20Section%201.pdf
>