Which of the following statements is an accepted insight into imperfect competition?
A)The higher the number of competitors, the greater the market power of firms.
B)Market power leads to all sellers accepting the market equilibrium price.
C)A seller's best choice depends on the actions that other businesses take.
D)Market power grows when the product is standardized and identical across sellers.

Question

Quizplus · Accepted Answer

In imperfect competition, a seller's best choice depends on the actions that other businesses take because each seller has some market power and can influence the market price through their decisions. This is in contrast to perfect competition where all firms are price takers and must accept the prevailing market price. Option A is incorrect because a higher number of competitors usually reduces market power. Option B is incorrect because market power means that sellers can set prices above the equilibrium level. Option D is incorrect because in a differentiated product market, firms may have some market power due to consumer preferences for specific features or attributes.

Which of the Following Statements Is an Accepted Insight into Imperfect