Which of the following examples is most likely to belong to a perfectly competitive market structure?

• A. Local cable television provider
• B. Electricity supply in a city
• C. Smartphone manufacturing
• D. Wheat farming

Answer: (D)

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 option against these characteristics. For example, a local cable television provider usually has few competitors and differentiated services, so it is not perfectly competitive.
3. Step 3: Consider electricity supply in a city, which is often a natural monopoly due to high infrastructure costs and limited competition, so it does not fit perfect competition.
4. Step 4: Evaluate smartphone manufacturing, which involves product differentiation, brand loyalty, and significant barriers to entry, making it an imperfectly competitive market.
5. Step 5: Recognize that wheat farming typically involves many farmers producing a homogeneous product with easy market entry and exit, fitting the criteria of a perfectly competitive market.