Perfect Competition and
the Supply Curve
For each of the following, is the business a price-taking producer? Explain your
A cappuccino café in a university town where there are dozens of very similar cap-
The makers of Pepsi-Cola
One of many sellers of zucchini at a local farmers’ market
The cappuccino café is probably a price-taking producer, especially if there are a
large number of cafés in town, since each will have a small market share and each
produces a standardized product.
There is only one manufacturer of Pepsi-Cola, and it works hard to differentiate
its product from others in the minds of consumers. It is not a price-taking pro-
Zucchini sellers at the farmers’ market are price-taking producers; there are many
of them, none of whom can affect the market price for zucchini, which is a stan-
For each of the following, is the industry perfectly competitive? Referring to market
share, standardization of the product, and/or free entry and exit, explain your
Alicia Keys concerts
Yes, aspirin is produced in a perfectly competitive industry. Many manufacturers
produce aspirin, the product is standardized, and new manufacturers can easily
enter and existing manufacturers can easily exit the industry.
No, Alicia Keys concerts are not produced in a perfectly competitive industry.
There is not free entry into the industry—there is only one Alicia Keys.
No, SUVs are not produced in a perfectly competitive industry. There are only a
few manufacturers of SUVs, each holding a large market share, and SUVs are not a
standardized product in the minds of consumers.