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Question
Macroeconomics
Posted 10 months ago
How is the price in a perfectly competitive market determined?
Choose 1 answer:
(A) by the strategic interaction of firms
(B) by each firm
(C) by mutual agreement of firms
(D) by the market
(E) by the government
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Answer from Sia
Posted 10 months ago
Solution
a
Perfect Competition Characteristics: In a perfectly competitive market, there are many buyers and sellers, none of whom has a significant impact on the market price. Firms are price takers, meaning they accept the market price as given
b
Price Determination: The price in a perfectly competitive market is determined by the intersection of the market demand and market supply curves. This equilibrium price reflects the willingness to pay of consumers and the marginal cost of production for firms
Answer
(D) by the market
Key Concept
Price determination in a perfectly competitive market
Explanation
In a perfectly competitive market, the price is determined by the market forces of demand and supply, not by individual firms or their strategic interactions or agreements.
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