Multiple Choice
In a perfectly competitive market, which of the following is true about the firm's demand curve?
95
views
11. Perfect Competition
Characteristics of Perfect Competition
Multiple Choice
Which of the following markets is most likely to be considered perfectly competitive?
A
Wheat farming
B
Automobile manufacturing
C
Cell phone service providers
D
Electricity distribution
Verified step by step guidance1
Step 1: Understand the characteristics of a perfectly competitive market. These include: many buyers and sellers, homogeneous products, free entry and exit, perfect information, and no single buyer or seller can influence the market price.
Step 2: Analyze each market option against these characteristics. For example, wheat farming typically has many producers selling a homogeneous product (wheat), with relatively easy entry and exit, and no single farmer can influence the market price.
Step 3: Consider automobile manufacturing. This market has fewer sellers, differentiated products, significant barriers to entry, and firms have some control over prices, so it is not perfectly competitive.
Step 4: Evaluate cell phone service providers. This market has few firms, differentiated services, and significant barriers to entry, which means it is closer to an oligopoly rather than perfect competition.
Step 5: Look at electricity distribution. This market often involves natural monopolies or regulated monopolies due to high infrastructure costs and limited competition, so it is not perfectly competitive.
Related Videos
Related Practice
