Question

In a perfectly competitive market, the price of a product

A)	is determined by buyers, and the quantity of the product produced is determined by sellers.

B)	is determined by sellers, and the quantity of the product produced is determined by buyers.

C)	and the quantity of the product produced are both determined by sellers.

D)	None of the above is correct.

Answer 1

In a perfectly competitive market the price and quantity is determined by the market forces that is, demand and supply.

In perfect competition no market participant has the market power. In other words no individual or firms action can influence the market price of the product.

First option is incorrect because it states that price is determined by buyer which is impossible.

Second option is also incorrect as seller too don't have market power.

Third is also incorrect. As firm font have market power to influence quantity and price.

Only left with none of the above is correct.

Correct answer is option D.

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