Which of the following markets would most closely resemble a perfectly competitive market?

• A. Wheat farming
• B. Electricity utilities
• C. Cell phone service providers
• D. Automobile manufacturing

Answer: (A)

Verified step by step guidance

1. Step 1: Understand the characteristics of a perfectly competitive market. These include many buyers and sellers, homogeneous products, free entry and exit, perfect information, and no single firm can influence the market price.
2. Step 2: Analyze each market option against these characteristics. For example, wheat farming typically has many producers, a standardized product (wheat), and relatively easy entry and exit.
3. Step 3: Consider electricity utilities, which often have few providers and high barriers to entry, making them closer to a monopoly or oligopoly rather than perfect competition.
4. Step 4: Evaluate cell phone service providers and automobile manufacturing, both of which have differentiated products, fewer firms, and significant barriers to entry, indicating imperfect competition.
5. Step 5: Conclude that wheat farming most closely resembles a perfectly competitive market because it best fits the key characteristics such as many sellers, homogeneous product, and ease of entry and exit.