Multiple Choice
In a competitive market, a very large number of small sellers who sell identical products imply which of the following market characteristics?
74
views
3. The Market Forces of Supply and Demand
Competitive Markets
Multiple Choice
If new manufacturers enter the computer industry, what is the most likely effect on the market equilibrium in a competitive market?
A
The demand for computers increases, causing the equilibrium price to rise.
B
The supply of computers increases, leading to a lower equilibrium price.
C
The demand for computers decreases, causing the equilibrium price to fall.
D
The supply of computers decreases, resulting in a higher equilibrium price.
Verified step by step guidance1
Step 1: Understand the market structure described, which is a competitive market where many manufacturers produce similar products, such as computers.
Step 2: Recognize that when new manufacturers enter the industry, the total quantity of computers supplied at each price increases. This means the supply curve shifts to the right.
Step 3: Recall the law of supply and demand: an increase in supply, with demand held constant, leads to a surplus at the original price.
Step 4: To eliminate the surplus, the market price will adjust downward, moving toward a new equilibrium where quantity demanded equals quantity supplied.
Step 5: Conclude that the entry of new manufacturers increases supply, which lowers the equilibrium price and increases the equilibrium quantity in the market.
Related Videos
Related Practice
