Multiple Choice
Which of the following is NOT a characteristic of price taker (perfectly competitive) markets?
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3. The Market Forces of Supply and Demand
Competitive Markets
Multiple Choice
Which of the following is a characteristic of a product-market in a competitive market?
A
Products are highly differentiated
B
Many buyers and sellers
C
Significant barriers to entry
D
Firms have control over market price
Verified step by step guidance1
Understand the concept of a competitive market: In microeconomics, a competitive market is characterized by many buyers and sellers, where no single participant can influence the market price significantly.
Analyze the characteristic 'Products are highly differentiated': In a competitive market, products are typically homogeneous or very similar, not highly differentiated. Product differentiation is more common in monopolistic competition or oligopoly.
Consider 'Significant barriers to entry': Competitive markets usually have low or no barriers to entry, allowing new firms to enter freely. Significant barriers are typical in monopolies or oligopolies.
Evaluate 'Firms have control over market price': In a competitive market, individual firms are price takers, meaning they accept the market price and do not have control over it. Price control is a feature of monopolies or firms with market power.
Conclude that 'Many buyers and sellers' is the correct characteristic of a product-market in a competitive market, as it ensures no single buyer or seller can influence the market price.
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