In the absence of government regulation, which of the following products would most closely fit the competitive price-taker (purely competitive) model?
A) beer because there are many consumers
B) cigarettes because there are several alternative brands that look similar
C) milk because there are many dairy farmers producing a virtually identical product
D) automobiles because there are substantial economies of scale in production

Question

Quizplus · Accepted Answer

Milk fits the competitive price-taker model because there are many dairy farmers producing a virtually identical product, and buyers can easily switch between producers based on price. This leads to a market where no individual producer can affect the price of the product, as they are all price-takers. The other options have factors that make them less purely competitive, such as brand differentiation (cigarettes), significant economies of scale (automobiles), or potential for market power (beer).

In the Absence of Government Regulation, Which of the Following