Question 1

The term price takers refers to buyers and sellers in
A)perfectly competitive markets.
B)monopolistic markets.
C)markets that are regulated by the government.
D)markets in which buyers cannot buy all they want and/or sellers cannot sell all they want.

Accepted Answer

In perfectly competitive markets, no individual buyer or seller has enough market power to influence the price. Thus, they must accept the prevailing market price and are considered to be price takers.

Question 2

In a perfectly competitive market, at the market price, buyers
A)cannot buy all they want, and sellers cannot sell all they want.
B)cannot buy all they want, but sellers can sell all they want.
C)can buy all they want, but sellers cannot sell all they want.
D)can buy all they want, and sellers can sell all they want.

Accepted Answer

In a perfectly competitive market, buyers can buy all they want at the market price because there are numerous sellers offering the same product. Similarly, sellers can sell all they want at the market price because there are numerous buyers willing to buy the product. Hence, the equilibrium price and quantity will be established where buyers and sellers can trade without any shortage or surplus.

Question 3

Which of the following is the least likely to be a competitive market?
A)ice cream
B)soybeans
C)cable television
D)new houses

Accepted Answer

Cable television is the least likely to be a competitive market because it tends to be dominated by a few large companies in each geographic area, making it difficult for new firms to enter and compete. The other options (ice cream, soybeans, and new houses) are more likely to have many competitors in the market.

Question 4

Buyers and sellers who have no influence on market price are referred to as
A)market pawns.
B)monopolists.
C)price takers.
D)price setters.

Accepted Answer

Price takers have no power to influence market price and must accept the prevailing price in the market. Monopolists, on the other hand, have market power and can set the price themselves. Market pawns is not a commonly used term in economics.

Question 5

In competitive markets,
A)firms produce identical products.
B)buyers can influence the market price more easily than sellers.
C)markets are more likely to be in equilibrium.
D)sellers are price setters.

Accepted Answer

In competitive markets, firms produce identical or homogeneous products, which means they are perfect substitutes for each other. This implies that all firms sell at the same price, i.e., the market price, and have no pricing power. Hence, option A is the correct choice. Option B is incorrect because in competitive markets, both buyers and sellers are price takers, and the market price is determined by the forces of demand and supply. Option C is partially correct because competitive markets tend to be in equilibrium, but this is not a necessary condition. Option D is incorrect because in competitive markets, no single seller has the power to set prices; they are determined by the overall market forces.

Question 6

Which of the following is not a characteristic of a perfectly competitive market?
A)Different sellers sell identical products.
B)There are many sellers.
C)Sellers must accept the price the market determines.
D)All of the above are characteristics of a perfectly competitive market.

Accepted Answer

All of the given characteristics (A, B, and C) are present in a perfectly competitive market. Therefore, D is not a characteristic of a perfectly competitive market.

Question 7

An example of a perfectly competitive market would be the market for
A)electricity.
B)soybeans.
C)coffee shops.
D)restaurants.

Accepted Answer

In a perfectly competitive market, there are many small firms producing homogenous products, there is perfect information available to all market participants, and there are no barriers to entry or exit. The market for soybeans fits this description as there are numerous small farms producing identical soybeans, and there is no significant market power held by any individual seller or group of sellers. The markets for electricity, coffee shops, and restaurants do not fit the description of a perfectly competitive market, as there are often significant barriers to entry, product differentiation, and market power held by larger firms.

Question 8

The highest form of competition is called
A)absolute competition.
B)cutthroat competition.
C)perfect competition.
D)market competition.

Accepted Answer

Perfect competition is the highest form of competition, where there are many buyers and sellers in the market, no one has the power to influence the price, and products are homogeneous or identical. In this form of competition, companies are forced to constantly innovate and offer the best prices and quality to attract customers.

Question 9

Which of the following is not a characteristic of a perfectly competitive market?
A)Sellers set the price of the product.
B)There are many sellers.
C)Buyers must accept the price the market determines.
D)All of the above are characteristics of a perfectly competitive market.

Accepted Answer

In a perfectly competitive market, sellers are price takers, meaning they must accept the market price determined by supply and demand. They do not have the power to set the price themselves.

Question 10

In competitive markets, which of the following is not correct?
A)Firms produce identical products.
B)No individual buyer can influence the market price.
C)Some sellers can set prices.
D)Buyers are price takers.

Accepted Answer

In competitive markets, no individual firm can set prices as they are price takers and have to accept the market-determined price. Therefore, statement C is not correct.

Question 11

In competitive markets, buyers
A)are price takers, but sellers are price setters.
B)are price setters, but sellers are price takers.
C)and sellers are price takers.
D)and sellers are price setters.

Accepted Answer

In a competitive market, both buyers and sellers are price takers. This means that they do not have the power to set prices, but rather have to accept the prevailing market price. If a buyer tries to offer a lower price than the market price, sellers will simply refuse to sell to them and opt for other buyers willing to pay the market price. Similarly, if a seller tries to charge a price higher than the market price, buyers will simply opt for other sellers offering the same product at a lower price. Therefore, in a competitive market, prices are set by the forces of supply and demand, and buyers and sellers have to accept the market price as it is.

Question 12

Assume the market for tennis balls is perfectly competitive. When one tennis ball producer exits the market,
A)the price of tennis balls increases.
B)the price of tennis balls decreases.
C)the price of tennis balls does not change.
D)there is no longer a market for tennis balls.

Accepted Answer

The answer of Assume the market for tennis balls is...

Question 13

The highest form of competition is called
A)arbitrage.
B)monopolistic competition.
C)equilibrium.
D)perfect competition.

Accepted Answer

Perfect competition is characterized by a large number of buyers and sellers, homogenous products, free entry and exit, perfect information, and no market power. In such a market structure, no one player can influence the market price, making it the highest form of competition.

Question 14

When all market participants are price takers who have no influence over prices, the markets have
A)only a few buyers and sellers.
B)numerous sellers but only a few buyers.
C)numerous buyers but only a few sellers.
D)numerous buyers and sellers.

Accepted Answer

When all market participants are price takers, it means that no single participant has enough market power to influence prices. In such a scenario, there are numerous buyers and sellers, and the market operates under perfect competition. Hence, the correct answer is D.

Question 15

If buyers and sellers in a certain market are price takers, then individually
A)they have no influence on market price.
B)they have some influence on market price but that influence is limited.
C)buyers will be able to find prices lower than those determined in the market.
D)sellers will find it difficult to sell all they want to sell at the market price.

Accepted Answer

Since buyers and sellers are price takers, they must accept the prevailing market price. As a result, they have no influence on the market price, which is determined by the overall supply and demand dynamics of the market.

Question 16

An example of a perfectly competitive market would be the market for
A)tennis racquets.
B)pizza.
C)garbage collection.
D)wheat.

Accepted Answer

Wheat is a commodity with many buyers and sellers, with no single producer having control over the price. There is easy entry and exit for producers, and no product differentiation exists. These conditions make it a perfect example of a perfectly competitive market.

Question 17

In competitive markets,
A)firms produce identical products.
B)no individual buyer can influence the market price.
C)no individual seller can influence the market price.
D)All of the above are correct.

Accepted Answer

All of the above are correct in competitive markets. Due to the large number of buyers and sellers, no individual buyer or seller can impact the market price. Moreover, firms in competitive markets produce identical or homogeneous products, making it difficult to distinguish one firm's product from another's.

Question 18

Assume a market is perfectly competitive. When a new producer enters the market, the
A)price in the market increases.
B)price in the market decreases.
C)price in the market does not change.
D)market is no longer a competitive market.

Accepted Answer

In a perfectly competitive market, there are already many producers supplying the same product at a given price. Therefore, if a new producer enters the market, the supply in the market increases, which may put downward pressure on the price. However, since the market is already in a state of perfect competition, this pressure on price will likely offset any increase in supply, leading to no significant change in price. Thus, the correct choice is C, where the price in the market does not change.

Question 19

An example of a perfectly competitive market would be the
A)cable TV market.
B)soybean market.
C)breakfast cereal market.
D)shampoo market.

Accepted Answer

In a perfectly competitive market, there are numerous buyers and sellers, homogenous products, perfect information, and free entry and exit into the market. The soybean market fits this description as there are many farmers selling soybeans, standardized quality of the product, publicly available information, and no barriers to entry or exit. Cable TV, breakfast cereal, and shampoo markets are not perfectly competitive due to factors such as brand differentiation, limited alternatives, and barriers to entry for new companies.

Question 20

Which of the following characteristics is required for a perfectly competitive market?
A)The goods offered for sale are exactly the same.
B)There are so many buyers and sellers that no single buyer or seller has any influence over the market price.
C)It is difficult for new sellers to enter the market.
D)Both a and b are correct.

Accepted Answer

A perfectly competitive market requires that the goods offered for sale are exactly the same, and that there are so many buyers and sellers that no single buyer or seller has any influence over the market price. It is also important that new sellers can easily enter the market, which is not a characteristic listed in any of the answer choices. Therefore, both choice A and choice B are correct.

Quiz 4: The Market Forces of Supply and Demand

The term price takers refers to buyers and sellers in

In a perfectly competitive market, at the market price, buyers

Which of the following is the least likely to be a competitive market?

Buyers and sellers who have no influence on market price are referred to as

In competitive markets,

Which of the following is not a characteristic of a perfectly competitive market?

An example of a perfectly competitive market would be the market for

The highest form of competition is called

Which of the following is not a characteristic of a perfectly competitive market?

In competitive markets, which of the following is not correct?

In competitive markets, buyers

Assume the market for tennis balls is perfectly competitive. When one tennis ball producer exits the market,

The highest form of competition is called

When all market participants are price takers who have no influence over prices, the markets have

If buyers and sellers in a certain market are price takers, then individually

An example of a perfectly competitive market would be the market for

In competitive markets,

Assume a market is perfectly competitive. When a new producer enters the market, the

An example of a perfectly competitive market would be the

Which of the following characteristics is required for a perfectly competitive market?