Which of the following arguments could be made as evidence that the market for cage-free eggs is perfectly competitive?
A)The U.S. Department of Agriculture has established standards for the labeling of cage-free eggs.
B)Sales of cage-free eggs have increased at a rate of 20 percent per year.
C)As more farmers began selling cage-free eggs, the increase in supply has driven down prices to the point where they just cover the cost of production.
D)The profits earned by farmers who sell cage-free eggs have continued to grow, despite the increasing number of farmers entering this market.

Question

Quizplus · Accepted Answer

The increase in supply causing prices to just cover the cost of production is an indication that the market is perfectly competitive. In a perfectly competitive market, sellers cannot charge prices above the cost of production in the long run. Other options do not necessarily indicate perfect competition, as the USDA standards and sales growth rates could occur in other types of markets, and increasing profits may indicate some market power or differentiation.

Which of the Following Arguments Could Be Made as Evidence