Multiple Choice
In perfectly competitive markets, why do individual firms face horizontal (perfectly elastic) demand curves?
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3. The Market Forces of Supply and Demand
Competitive Markets
Multiple Choice
In a competitive market, a response strategy requires suppliers to be selected primarily based on which of the following criteria?
A
their proximity to the buyer's location
B
their willingness to offer exclusive contracts
C
their ability to deliver the lowest cost
D
their long-term relationship with the buyer
Verified step by step guidance1
Understand the nature of a competitive market, where many suppliers offer similar products and buyers have multiple options.
Recognize that in such markets, price competition is intense, so buyers typically prioritize minimizing costs to maximize their own benefits.
Analyze the given options: proximity, exclusive contracts, lowest cost, and long-term relationships, and consider which factor most directly impacts the buyer's cost efficiency.
Recall that in competitive markets, suppliers are usually chosen based on their ability to offer the best price (lowest cost), since other factors like exclusivity or relationships are less influential.
Conclude that the primary criterion for selecting suppliers in a competitive market response strategy is their ability to deliver the lowest cost.
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