Which of the Following Characteristics of a Competitive Market Make

question 112

Multiple Choice

Which of the following characteristics of a competitive market make auction sites such as eBay so popular?

• A) There is freedom of entry and exit.
• B) There are very low transaction costs.
• C) There are only one or two sellers.
• D) Buyers and sellers have complete information.

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Definitions:

Shoeleather Costs

The increased costs of transactions caused by inflation, including the time and effort spent to avoid holding cash that is rapidly losing value.

Menu Costs

The expenses companies incur while changing their prices, including costs related to reprinting menus, updating marketing materials, and altering price tags.

Saving Distortions

Alterations in the savings behavior of individuals or institutions due to external influences, such as tax policies or inflation.

Real Interest Income

The income from interest after adjusting for inflation, reflecting the true purchasing power of interest earnings.