A perfectly competitive market has which of the following characteristics? (Please select all that apply).Group of answer choicesAll of the goods sold are the sameFew sellersMany buyersBuyers and sellers have large influences on the price
Question
A perfectly competitive market has which of the following characteristics? (Please select all that apply).Group of answer choicesAll of the goods sold are the sameFew sellersMany buyersBuyers and sellers have large influences on the price
Solution
A perfectly competitive market is characterized by:
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All of the goods sold are the same: This is true. In a perfectly competitive market, the products are homogeneous or identical. This means that consumers have no preference for a product from one firm over another.
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Few sellers: This is false. A perfectly competitive market is characterized by a large number of sellers. Each seller is small relative to the market and cannot influence the market price.
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Many buyers: This is true. A perfectly competitive market has a large number of buyers. Each buyer is small relative to the market and cannot influence the market price.
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Buyers and sellers have large influences on the price: This is false. In a perfectly competitive market, both buyers and sellers are price takers. They cannot influence the market price. The price is determined by the interaction of total market demand and total market supply.
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