Name ___________________________ Class _____________________ Date __________

CHAPTER

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STUDENT ACTIVITY

Identifying Perfect Competition

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SECTION 1 Few industries meet the conditions for perfectly competitive markets, although one of the three described below comes close. ◆ Read the following descriptions of three markets and answer the questions that follow. Aspirin has been used to treat pain for over 100 years. It is one of the most widely used drugs in the world. Even though aspirin is produced by numerous pharmaceutical companies and marketed under different brand names, all aspirin is essentially the same drug. In the United States, aspirin is manufactured by pharmaceutical companies and is monitored to ensure quality and safety. Wheat is one of the most important agricultural products in the United States. Wheat is grown by many farmers throughout the country, especially in the Midwest. Buyers from many companies travel throughout the United States to find wheat for breakfast cereals, bread, flour, animal food, and many other products. Buyers seek out the best prices, knowing they’ll get essentially the same product wherever they find it. Farmers may grow more or less wheat from year to year, depending on the prices they can expect. If wheat prices fall too low, they can switch to corn or other grains if they believe they can make more profit. Buyers likewise may switch to other grains if wheat prices rise too high, or if other grains become cheaper. Commercial airplane manufacturing is a huge business dominated by two big companies: Boeing and Airbus. These two giant manufacturers produce most of the passenger airplanes in use. The competition between these two manufacturers can be intense. Considering the high costs of developing these planes—it recently cost Airbus more than $13 billion to develop the A380 Superjumbo aircraft—it is not surprising that planes can sell for over $260 million each. 1. Which of these markets comes closest to being a perfectly competitive market? Explain.

2. Describe two of the conditions of a perfectly competitive market that are not met by each of the other two markets.

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