Multiple Choice
Which of the following best illustrates the component of 'free entry and exit' in a competitive market?
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3. The Market Forces of Supply and Demand
Competitive Markets
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Join thousands of students who trust us to help them ace their exams!Watch the first videoMultiple Choice
In a perfectly competitive market, we assume the products are __ in the minds of consumers.
A
identical
B
unique
C
scarce
D
differentiated
Verified step by step guidance1
Understand the characteristics of a perfectly competitive market. One key feature is that the products offered by different firms are perceived by consumers as being the same.
Recall that in perfect competition, no single firm can influence the market price because the products are perfect substitutes for each other.
This means that consumers see no difference between the products from different sellers, so the products are considered __identical__ in the minds of consumers.
Contrast this with other market structures where products might be unique, scarce, or differentiated, which affects consumer perception and firm pricing power.
Therefore, the correct term to fill in the blank is 'identical' because it reflects the assumption that products are perfect substitutes in a perfectly competitive market.
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