The representative consumer acts competitively
A) when he or she can haggle for a lower price.
B) when he or she is a price-taker.
C) when he or she is a price-maker.
D) if the consumer is large relative to the size of the market.

Question

Quizplus · Accepted Answer

A representative consumer is a theoretical construct that represents the behavior of an average consumer in the market. The assumption is that the representative consumer is a price-taker, meaning that he or she is too small to influence the market price and must accept the prevailing price as given. Thus, the representative consumer acts competitively by taking the market price as a given and choosing how much to consume based on his or her preferences and income. The other choices are incorrect because haggling for a lower price (A) or being a price-maker (C) implies market power, which is not a characteristic of the representative consumer. Furthermore, the size of the consumer relative to the market (D) is not a determining factor for competitive behavior.

The Representative Consumer Acts Competitively