An essential characteristic of a perfectly competitive market is that buyers and sellers have:
A. so much competition that they must work together perfectly to set a market price.
B. no control over the price they set because it is determined by government.
C. no competition and so must set the market price on their own.
D. so much competition that they have no ability set their own price.
Answer: D
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An increase in the price a firm receives for its output will lead the firm to:
A. leave output unchanged and earn greater profits. B. reduce output. C. expand output. D. leave output unchanged and earn smaller losses.
Relative price is the price of a specific good compared to ______.
a. the price index b. the rate of inflation c. the price of that good one year earlier d. the price of other goods
Assume that price underestimates the value that society places on the flu vaccine. If firms produce where P = MC, firms will be producing
A. the socially efficient amount of flu vaccine. B. more than the socially efficient amount of flu vaccine C. so that consumer surplus is zero. D. less than the socially efficient amount of flu vaccine.
When there is an expansionary gap, inflation will ________, in response to which the Federal Reserve will ________ real interest rates, and output will ________.
A. decline; lower; expand B. increase; raise; decline C. decline; lower; decline D. decline; raise; decline