Which of the following markets is most likely to be considered perfectly competitive?

• A. The market for smartphones
• B. The market for wheat
• C. The market for automobiles
• D. The market for electricity

Answer: (B)

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 buyer or seller can influence the market price.
2. Step 2: Analyze each market option against these characteristics. For example, the market for smartphones has few dominant firms and differentiated products, so it is not perfectly competitive.
3. Step 3: Consider the market for wheat. It typically has many sellers (farmers), homogeneous products (wheat is largely identical regardless of seller), and relatively easy entry and exit, which aligns well with perfect competition.
4. Step 4: Evaluate the market for automobiles, which has few large firms and differentiated products, making it more oligopolistic than perfectly competitive.
5. Step 5: Look at the market for electricity, which often has high barriers to entry and is usually regulated or monopolistic, so it does not fit the perfect competition model.