Which of the following characteristics of a farmers' market makes it a good example of a perfectly competitive market?
A) Selling product at a farmers' market was very profitable for farmers in the early 2000s. As result, many farmers sold their farms to larger firms.
B) Farmers who sell product at a farmers' market are similar to other entrepreneurs who introduce products that earn short-run profits but invite competition that drives down prices and profits in the long run.
C) Farmers who sell product at a farmers' market are similar to other business owners who take advantage of the willingness of some consumers to pay high prices for new and different products.
D) Farmers selling product at a farmers' market provide a product that is a necessity, rather than a luxury.

Question

Quizplus · Accepted Answer

Option B represents the characteristic of a perfectly competitive market by mentioning how farmers who sell at the market experience short-run profits which invite competition and drive down prices and profits in the long run. In a perfectly competitive market, no individual firm can affect the market price; instead, all firms are price takers. This means that they have to accept the market price in order to sell their products. Option A is incorrect because it talks about consolidation and sale of farms to larger firms which represent monopolistic market characteristics. Option C mentions high prices which do not reflect a perfectly competitive market where prices are uniform across firms. Option D is incorrect because the type of product does not determine whether a market is perfectly competitive or not.

Which of the Following Characteristics of a Farmers' Market Makes