Multiple Choice
In the context of competitive markets, what does it imply if an e-commerce website offers fewer models, colors, and sizes than a physical store?
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3. The Market Forces of Supply and Demand
Competitive Markets
Multiple Choice
In a competitive market, each seller has limited control over the price of their product because:
A
there are many sellers offering identical products
B
each seller faces a downward-sloping demand curve
C
government regulations set the price for all products
D
buyers have no influence on market prices
Verified step by step guidance1
Understand the characteristics of a perfectly competitive market: many sellers, identical products, and free entry and exit.
Recognize that in such a market, each seller is a price taker, meaning they accept the market price as given and cannot influence it.
Recall that the demand curve faced by an individual seller in perfect competition is perfectly elastic (horizontal) at the market price, not downward-sloping.
Analyze the options: sellers have limited control over price primarily because there are many sellers offering identical products, making the product indistinguishable and competition intense.
Conclude that government regulations or buyers having no influence are not the main reasons for limited price control in a competitive market.
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