Question

Identical products, as well as a large number of buyers and sellers, are characteristics of a ____________ market. In such markets, sellers of goods ___________ influence the prevailing market price, giving them the role of price ___________- in the market.

Answer 1

Answer:

1. Perfect competition

2. Little to no

3. takers

Explanation:

Following are the features of Monopolistic competition to make you understand better.

Large numbers of buyers and sellers: No single buyer or seller is able to

influence the market price for the product – this is only possible through high  volume which dilutes any power any single party may have.

Homogeneous product: An identical product means no individual producer can  charge more for a good that could be considered superior.

Free entry and exit: Firms can leave and enter as determined by fluctuations in  profit.

Perfect knowledge of prices: Buyers and sellers are fully aware of prices in the  market.

Transport costs are negligible: This doesn’t impact on the market choices of  the economic agents.

Perfect factor mobility: Factors of production are perfectly mobile, allowing free  long term adjustments to be made by the firm.

Firms are price takers: Firms are price takers as they have little to no influence on the market.