Which of the following is characteristic of a seller's market in competitive markets?

• A. Market prices are consistently below equilibrium.
• B. There is a surplus of goods available for sale.
• C. Prices tend to rise due to excess demand over supply.
• D. Buyers have more bargaining power than sellers.

Answer: (C)

Verified step by step guidance

1. Step 1: Understand the concept of a seller's market. In microeconomics, a seller's market occurs when the demand for a good exceeds the supply at the current price, giving sellers more power to raise prices.
2. Step 2: Recall the equilibrium price, which is the price where quantity demanded equals quantity supplied. If prices are below equilibrium, there is excess demand, leading to shortages.
3. Step 3: Analyze the options: if prices are consistently below equilibrium, this usually causes excess demand, not a surplus. A surplus occurs when supply exceeds demand, which characterizes a buyer's market, not a seller's market.
4. Step 4: Recognize that in a seller's market, because demand exceeds supply, prices tend to rise as buyers compete to purchase limited goods, increasing sellers' bargaining power.
5. Step 5: Conclude that the characteristic feature of a seller's market is that prices tend to rise due to excess demand over supply, making this the correct description.