Multiple Choice
In a perfectly competitive market, at the shutdown point, the price is equal to which of the following?
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3. The Market Forces of Supply and Demand
Competitive Markets
Multiple Choice
Which of the following best describes a competitive market?
A
A market where there are many sellers competing to offer similar products, and no single seller can influence the market price.
B
A market where government sets the price and output for all sellers.
C
A market where a few large firms collude to set prices and output.
D
A market dominated by a single seller who sets the price for the entire market.
Verified step by step guidance1
Understand the definition of a competitive market: it is characterized by many sellers offering similar or identical products, where no single seller has the power to influence the market price.
Recognize that in a competitive market, the price is determined by the forces of supply and demand, and individual sellers are price takers, meaning they accept the market price as given.
Contrast this with other market structures: a market where the government sets prices is a regulated market, not competitive; a market with a few firms colluding is an oligopoly; and a market dominated by a single seller is a monopoly.
Identify that the key features of a competitive market include many sellers, homogeneous products, free entry and exit, and perfect information, which ensure no single seller can control the price.
Therefore, the best description of a competitive market is the one that highlights many sellers competing with similar products and no single seller influencing the market price.
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