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Cofee and Economies of Scale

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LP: SIX COFFEE PRICES Characterization of a perfect competition market depends on a number of issues or attributes. Evidently, the coffee market is not a perfectly competitive market given the fact that the players in the market are not price takers. Corporations that buy coffee from the farmers are acting as cartels in a bid to affect the prices of coffee, which is consequently hurting the farmers who receives little payment of their coffee. Oxfam is giving indications that the current crisis is as a result or coffee rosters deliberating on the prices to pay farmers thereby interfering with the free market. Hence, the market for coffee is not perfectly competitive given that the players cease to be price takers and affect those prices. In perfectly competitive markets, there are infinite sellers and buyers in that the entry or even the exit of one seller or buyer does not affect the market (King et al 61). In addition, there should be absence of either political or social barriers that will hinder the entry of other companies into the market (Baumol and Blinder 27). Products offered ought to be homogenous and the concept of no increasing returns to scale facilitates the sufficiency of firms in the market. Clearly, there are a score of characteristics that the coffee industry fails making it not a perfect competition market. As a result, companies like affect the market directly and the collapse of such companies will render the entire market failed. World coffee market fails in a number of factors for it to pass as a perfect competition market. Firms deliberate on the prices indicating that paying the farmers higher price will only increase glut. According to the article, Starbuck is large player in this market and if its customers see the corporation as a Third World profiteer there will be consequences on the entire

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