Why Are Both Buyers and Sellers Price Takers in a Perfectly

question 174

Multiple Choice

Why are both buyers and sellers price takers in a perfectly competitive market?

• A)Because the price is determined by government intervention and dictated to buyers and sellers.
• B)Because each buyer and seller knows it is illegal to conspire to affect price.
• C)Because both buyers and sellers in a perfectly competitive market are concerned for the welfare of others.
• D)Because each buyer and seller is too small relative to others to independently affect the market price.

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Definitions:

Product Cost Method

An accounting method that determines the cost to produce a product by summing the costs of raw materials, direct labor, and allocated overhead.

Invested Assets

Assets that are purchased or acquired for the purpose of generating income, capital appreciation, or other benefits to the investor.

Desired Profit

The target amount of profit a company aims to achieve in a specific period, often used in pricing and production planning.

Contribution Margin

The amount by which sales revenue exceeds variable costs, indicating how much revenue contributes towards covering fixed costs and generating profit.