Question 1

Which of the following statements correctly describes a perfectly competitive market?

Accepted Answer

In a perfectly competitive market, all participants are price-takers, meaning they have no ability to influence the market price and must accept the prevailing market price as given.

Option B is incorrect, as haggling and bargaining are not observed in a perfectly competitive market where prices are determined by the forces of supply and demand.

Option C is also incorrect, as individual sellers and buyers cannot influence the market price in a perfectly competitive market.

Option D is incorrect, as in a perfectly competitive market, all buyers pay the same price for the same product.

Question 2

Which of the following is a feature of a perfectly competitive market?

Accepted Answer

A perfectly competitive market requires a large number of small sellers who are unable to influence the market price. Option A is incorrect as a perfectly competitive market has many sellers, not just one. Option B is incorrect as the government interference goes against the principles of a perfectly competitive market. Option C is incorrect as the products sold in a perfectly competitive market are identical or homogeneous.

Question 3

If all sellers and all buyers face the same price during an exchange,it is referred to as the ________.

Accepted Answer

The term used to describe a situation where all sellers and all buyers face the same price during an exchange is market price. This is determined by the forces of supply and demand in the market and represents the equilibrium price at which the quantity of goods demanded by buyers matches the quantity supplied by sellers. The other choices (A, C, and D) do not accurately describe this concept.

Question 4

Suppose the market for cement is such that the output of all sellers is identical in composition and quality.While there are a large number of buyers and sellers,everyone conducts transactions at a common market price.Which of the following statements is true about the structure of the cement market?

Accepted Answer

The market for cement meets all the conditions of perfect competition, including identical products, a large number of buyers and sellers, and a common market price. Therefore, the cement market is perfectly competitive. Option B is incorrect because there is no information provided in the question about government regulation. Option C is incorrect as all participants are price takers and not price makers. Option D is incorrect since it implies coercion, and involuntary transactions are not a characteristic of a perfectly competitive market.

Question 5

The automobile market in the United States is often said to be highly competitive.But it is not perfectly competitive.What makes this market not perfectly competitive?

Accepted Answer

Different car companies make different vehicles with different features, which means they are not perfect substitutes for one another. This differentiation leads to product differentiation and makes the market less than perfectly competitive.

Question 6

Which of the following is not an example of a market?

Accepted Answer

The requirement for homeowners to pay for a sidewalk is not a market because there is no voluntary exchange of goods or services between buyers and sellers. The other options involve buying and selling goods or services in a market setting.

Question 7

Which of the following examples best approximates a competitive market?

Accepted Answer

The market for soybeans in the United States is likely the best approximation of a competitive market as it is a commodity with a large number of buyers and sellers, and the product is relatively homogeneous. The F-35 fighter plane market and Jackson Pollock paintings market are both oligopolies with a small number of dominant players. The Tesla electric car market is not as concentrated as the first two, but it still has fewer players than the soybean market, and the product is not as standardized.

Question 8

Which of the following statements correctly describes a competitive market?

Accepted Answer

A competitive market is one where there are many buyers and sellers, and no single buyer or seller has the power to influence the market price. Instead, the market price is determined by the interaction of demand and supply. Option A is incorrect because in a competitive market, prices are determined by supply and demand and not through negotiation. Option B is incorrect because in a competitive market, prices for the same good are the same across all sellers. Option C is incorrect because having a single seller with the ability to control prices is a characteristic of a monopoly market, not a competitive market.

Question 9

Should an economist consider a Web-based job search portal like Monster.com as a market?

Accepted Answer

The answer of Should an economist consider a Web-based job...

Question 10

Explain the role of prices in a market.

Accepted Answer

The answer of Explain the role of prices in a...

Question 11

Which of the following is not a required characteristic of a market?

Accepted Answer

Government setting the price of the good or service is not a required characteristic of a market. In fact, markets are typically characterized by the absence of government intervention in the pricing of goods and services, and instead rely on the forces of supply and demand to determine prices.

Question 12

A seller who is a price-taker charges ________.

Accepted Answer

A price-taker is a seller who has no control over the market price and must accept the market price as given. Therefore, the seller charges the market price.

Question 13

The gasoline market in the United States is often said to be highly competitive.But it is not perfectly competitive.What makes this market not perfectly competitive?

Accepted Answer

Different additives in gasoline create product differentiation, which is a characteristic that prevents the market from being perfectly competitive.

Question 14

Which of the following is true of a market?

Accepted Answer

The price acts as a selection device for buyers and sellers in every market. This means that buyers and sellers are drawn to a market because of the price at which goods and services are offered. The high price of a good or service in a particular market may deter buyers from purchasing, while the low price may attract more buyers than sellers. Therefore, the price mechanism plays an important role in determining supply and demand in the market. Option A is incorrect because not all markets require continuous surveillance and government control. Option B is also incorrect because markets do not always require a specific physical location. Option C is incorrect because goods and services are not always exchanged at fixed prices in all markets.

Question 15

In a perfectly competitive market,________.

Accepted Answer

In a perfectly competitive market, all sellers sell an identical good or a service. This means that consumers have access to the same product regardless of who they buy it from, and sellers cannot differentiate their products through branding or other means. This results in a level playing field for all market participants, with prices determined solely by supply and demand. Options A, B, and D do not accurately describe a perfectly competitive market.

Question 16

Which of the following does NOT have a market in the real world?

Accepted Answer

All of the options listed have a market in the real world, however, not all markets are legal or regulated. The U.S. Postal Service has a monopoly on first-class mail delivery, but there are still other types of mail services available. Kidneys for transplant are not legally allowed to be bought or sold, but there is still a black market for them. Illegal narcotic substances also have a large and profitable black market.

Question 17

A(n)________ is a group of buyers and sellers who are trading goods and/or services.

Accepted Answer

A market is a group of buyers and sellers who come together to exchange goods and services. A firm is an organization that produces and sells goods or services. An enterprise is another term for a business, which can include firms or other organizations. A government is a political entity responsible for governing a specific geographic area. None of these options fully meet the definition of a group of buyers and sellers who are trading goods and/or services, except for market.

Question 18

The gasoline market in the United States is often said to be highly competitive.It is not perfectly competitive,but it has features and results that are similar to those of a perfectly competitive market,such as ________.

Accepted Answer

All of the options are true regarding the gasoline market in the United States. In a highly competitive market, an individual buyer cannot influence the market price of gasoline by himself, and an individual gas station cannot influence the market price by itself. Additionally, gas stations located near each other tend to charge the same or very similar prices, reflecting the competitive nature of the market.

Question 19

Why do economists study perfectly competitive markets even though few,if any,markets in the real world are perfectly competitive?

Accepted Answer

The perfectly competitive model is a good approximation for many markets in the real world, and studying this market helps us to understand how real markets work. However, it is important to note that this model is not always perfectly applicable to real-life scenarios.

Question 20

In competitive markets,firms ________.

Accepted Answer

In competitive markets, firms take the market price as given and adjust their own prices accordingly to remain competitive. They do not coordinate pricing decisions with other firms, have the government set prices, or set the market price.

Quiz 4: Demand, Supply, and Equilibrium