Multiple Choice
Which of the following is an advantage that a competitive market economy offers to producers?
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3. The Market Forces of Supply and Demand
Competitive Markets
Multiple Choice
Which of the following is a main feature of a competitive market economy?
A
Barriers to entry prevent new firms from entering the market
B
Many buyers and sellers with no single agent able to influence the market price
C
Government sets prices for goods and services
D
Firms have significant control over market supply
Verified step by step guidance1
Understand the concept of a competitive market economy: it is characterized by many buyers and sellers, where no single participant can influence the market price significantly.
Identify the role of barriers to entry: in a competitive market, there are typically no significant barriers preventing new firms from entering or exiting the market.
Recognize the price-setting mechanism: in a competitive market, prices are determined by the forces of supply and demand rather than by government intervention or individual firms.
Analyze the market power of firms: in a competitive market, individual firms have little to no control over the market supply and must accept the market price as given.
Conclude that the main feature of a competitive market economy is the presence of many buyers and sellers with no single agent able to influence the market price.
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