Several years ago, Alcoa was effectively the sole seller of aluminum because the firm owned nearly all of the aluminum ore reserves in the world. This market was not perfectly competitive because this situation violated the:
A) price-taking assumption.
B) homogeneous product assumption.
C) free entry assumption.
D) A and B are correct.
E) A and C are correct.

Question

Quizplus · Accepted Answer

Alcoa's control over nearly all aluminum ore reserves would violate the price-taking assumption, as it could influence market prices due to its dominant position. It also violates the free entry assumption, as new firms would find it difficult to enter the market without access to aluminum ore reserves. The homogeneous product assumption is not directly violated by Alcoa's market position.

Several Years Ago, Alcoa Was Effectively the Sole Seller of Aluminum