A market is competitive if i) firms have the flexibility to price their own product.
Ii) each buyer is small compared to the market.
Iii) each seller is small compared to the market.

Question

Quizplus · Accepted Answer

A competitive market is characterized by a large number of buyers and sellers, so each buyer and seller has limited market power. This fulfills conditions ii) and iii). The flexibility of pricing their own product is not a defining characteristic of a competitive market as some markets, such as commodity markets, have standardized prices. Therefore, option i) is not necessary for a market to be competitive.

A Market Is Competitive If I) Firms Have the Flexibility