In the context of competitive markets, how is the influence of interest groups typically weakened?

• A. Interest groups gain more power in competitive markets because firms are more dependent on lobbying.
• B. Competitive markets allow interest groups to set market prices directly.
• C. Interest group influence is strengthened because competition leads to market failures.
• D. Competitive markets reduce the ability of interest groups to manipulate prices due to the presence of many buyers and sellers.

Answer: (D)

Verified step by step guidance

1. Step 1: Understand the nature of competitive markets, which are characterized by many buyers and sellers, each having a negligible influence on market prices.
2. Step 2: Recognize that in competitive markets, prices are determined by overall supply and demand rather than by individual firms or interest groups.
3. Step 3: Analyze how the presence of many market participants limits the ability of any single interest group to influence prices or market outcomes through lobbying or manipulation.
4. Step 4: Consider that because firms are price takers in competitive markets, their dependence on lobbying to alter prices is reduced, weakening the power of interest groups.
5. Step 5: Conclude that the competitive market structure inherently reduces the effectiveness of interest groups in manipulating prices, thereby weakening their influence.