A Market Is Considered Perfectly Competitive If

question 6

Multiple Choice

A market is considered perfectly competitive if:
I. there is a lot of product differentiation among sellers.
II. there are many sellers, each small relative to the total market.
III. the product sold is similar across sellers.
IV. there are only a few buyers.

• A) I and II only
• B) I, II, and III only
• C) II and III only
• D) II, III, and IV only

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Definitions:

Consumer Surplus I

The gap between what consumers are prepared and able to spend on a product or service and what they end up paying.

Price

The amount of money required to purchase a good or service.

Comparative Advantage

The ability of an individual, firm, or country to produce a good or service at a lower opportunity cost than other producers.

Absolute Advantage

Refers to the capability of an entity to produce a good or service more efficiently than its competitors using the same amount of resources.