In a competitive market that is driven by supply and demand, control over prices and quantities is primarily exercised by:

• A. the interactions of buyers and sellers
• B. a cartel of firms
• C. a single dominant producer
• D. government price controls

Answer: (A)

Verified step by step guidance

1. Understand the nature of a competitive market: it consists of many buyers and sellers, none of whom can individually influence the market price significantly.
2. Recall that in such markets, prices and quantities are determined by the forces of supply and demand, which reflect the collective decisions of all buyers and sellers.
3. Recognize that a cartel of firms or a single dominant producer would imply some level of market power or control, which contradicts the definition of a perfectly competitive market.
4. Note that government price controls are external interventions and not a characteristic of a competitive market's natural price-setting mechanism.
5. Conclude that the primary control over prices and quantities in a competitive market comes from the interactions of buyers and sellers, as their collective behavior determines equilibrium price and quantity.