In a perfectly competitive market, we assume the product is identical in the minds of which group?

• A. Only the buyers
• B. All buyers and sellers
• C. Only the sellers
• D. Government regulators

Answer: (B)

Verified step by step guidance

1. Understand the concept of a perfectly competitive market: it is a market structure characterized by many buyers and sellers, where no single participant can influence the market price.
2. Recall that one key assumption in perfect competition is that the product is homogeneous or identical, meaning there is no differentiation in the eyes of market participants.
3. Identify who perceives the product as identical: in perfect competition, both buyers and sellers view the product as the same, which ensures that competition is based solely on price.
4. Recognize that this assumption excludes any product differentiation or branding effects, which would otherwise give sellers some market power.
5. Conclude that the product is assumed identical in the minds of all buyers and sellers, ensuring a uniform market price and perfect competition.