A market situation with homogeneous products, many informed buyers and sellers, and ease of entry is a ______________ market situation.
A) oligopoly
B) monopolistic competition
C) monopoly
D) pure competition
E) both B and C

Question

Quizplus · Accepted Answer

A market situation with homogeneous products, many informed buyers and sellers, and ease of entry is characteristic of pure competition. In pure competition, there are many small firms that sell identical products, and no single firm has any control over the market price. Furthermore, because there are many buyers and sellers, nobody can influence the price by buying or selling a large quantity of the product. Finally, in a pure competition market, there are low barriers to entry and exit, which means that new firms can easily enter the market if they see an opportunity for profit, and existing firms can easily exit if there are no profits to be made.

A Market Situation with Homogeneous Products, Many Informed Buyers and Sellers