Principles of Economics- Mankiw (5th) 63

Principles of Economics- Mankiw (5th) 63 - CHAPTER 4 T H E...

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CHAPTER 4 THE MARKET FORCES OF SUPPLY AND DEMAND 67 no single buyer or seller can influence the market price. Because buyers and sell- ers in perfectly competitive markets must accept the price the market determines, they are said to be price takers. There are some markets in which the assumption of perfect competition ap- plies perfectly. In the wheat market, for example, there are thousands of farmers who sell wheat and millions of consumers who use wheat and wheat products. Be- cause no single buyer or seller can influence the price of wheat, each takes the price as given. Not all goods and services, however, are sold in perfectly competitive markets. Some markets have only one seller, and this seller sets the price. Such a seller is called a monopoly. Your local cable television company, for instance, may be a mo- nopoly. Residents of your town probably have only one cable company from which to buy this service. Some markets fall between the extremes of perfect competition and monopoly.
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