Question

Which of the following is not a characteristic of the structure of perfectly competitive markets?

		Each individual firm is small in size relative to the overall market.
		Few sellers.
		Homogeneous product.
		Easy, low cost entry and exit.

QUESTION 2

In the perfectly competitive market, all firms in the market are assumed to be producing:

		Identical products.
		differentiated products.
		products that are heavily advertised.
		complimentary products.

QUESTION 3

Which of the following is characteristic of a perfectly competitive market?

		There is free entry into and exit from the market.
		Individual firms can exert a perceptible influence on the market price.
		The firms in the market produce differentiated products.
		All of the above are true.

QUESTION 4

Which of the following BEST illustrates a perfectly competitive market?

		Soft drinks.
		Automobiles.
		Aircraft.
		Soybean farmers.

QUESTION 5

A firm in a price-taker market:

		Must take the price that is determined in the market.
		Must reduce its price if it wants to sell a larger quantity.
		must be large relative to the total market.
		can exert a major influence on the market price.

Answer 1

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A perfectly competitive market has the following characteristics:

• There are many buyers and sellers in the market.
• Each company makes a similar product.
• Buyers and sellers have access to perfect information about price.
• There are no transaction costs.
• There are no barriers to entry into or exit from the market.

1. Few sellers.

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2. Identical products.

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3. There is free entry into and exit from the market.

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4. Soybean farmers.

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5. Must take the price that is determined in the market.