Classify the following markets as perfectly competitive, monopolistic, or monopolistically competitive, and explain your answers. Wooden no. 2 pencilsCopper (hint: there are many sellers)Local public utilities (ex. water, electricity)Peanut butterLipstick

a)no. 2 wooden pencils - perfectly competitive market

b) copper - perfectly competitive market

c) Local public utilities- monopoly market

d) Peanut butter - monopolistic competitive market

e) Lipstick - monopolistic market

All no 2 pencils are identical each other. There are many sellers of pencils. And there's usually a general price for the pencils. Also, there are little barriers to entry or exit of firms. So the market for the no 2 pencils are perfectly competitive firms.

Also, coppers are identical to each other. They can't be differentiated from each other. There is usually a standard price for copper. So the market for copper is perfectly competitive.

For local public utilities, there is usually one firm providing the service. Also, because of the high cost of setting up these services, there is a high barrier to the entry of firms into the industry. This is why local public utilities are a monopoly.

Peanut butter and lipsticks are perfectly monopolistic firms because:

A. There are many firms selling this product but the products are usually differentiated.

B. Also, firms sets the price for their products

Explanation:

A perfect competition is characterised by many buyers and sellers of homogenous goods and services. Market prices are set by the forces of demand and supply. There are no barriers to entry or exit of firms into the industry.

In the long run, firms earn zero economic profit. If in the short run firms are earning economic profit, in the long run firms would enter into the industry. This would drive economic profit to zero.

Also, if in the short run, firms are earning economic loss, in the long run, firms would exit the industry until economic profit falls to zero.

A monopolistic competition is when there are many firms selling differentiated goods. The demand curve is downward sloping

A monopoly is when there is only one firm operating in the industry. There are high barriers to entry and exit of firms in the industry.

I hope my answer helps you

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