All of the following are characteristics of the market for a commodity product except
A) economic profit is zero.
B) price is driven down to just equal opportunity costs.
C) consumers perceive the goods to be identical no matter who supplies them.
D) entry by new firms is easy.
E) All of these are characteristics of a market for a commodity product.

Question

Quizplus · Accepted Answer

All of these characteristics are typically found in a market for a commodity product. Economic profit is zero because firms cannot charge above the market price without losing market share. Price is driven down to just equal opportunity costs because firms must compete on price to attract customers. Consumers perceive goods as identical because there is little differentiation between products. Entry by new firms is easy because there are few barriers to entry.

All of the Following Are Characteristics of the Market for a Commodity