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Chapter 8: Problem 1

A perfectly competitive market is not characterized by a. many small firms. b. a great variety of different products. c. free entry into and exit from the market. d. any of the above.

Short Answer

Expert verified
A perfectly competitive market is not characterized by a great variety of different products (option 'b'). This is because a perfectly competitive market features homogeneous or identical products that are perfect substitutes for each other.

Step by step solution

01

Understand the characteristics of a perfectly competitive market

A perfectly competitive market has the following characteristics: 1. A large number of buyers and sellers. 2. Homogeneous products or identical products. 3. Free entry and exit of firms. 4. Perfect information about the market and prices. Now we will analyze each option to see which one does not match these characteristics.
02

Analyze Option 'a' - Many small firms

In a perfectly competitive market, there are many small firms. This ensures that no single firm has the power to influence the market price. Therefore, option 'a' does characterize a perfectly competitive market.
03

Analyze Option 'b' - A great variety of different products

A perfectly competitive market is characterized by identical or homogeneous products. This means that all products within the market are perfect substitutes for each other. Contrarily, option 'b' states that there is a great variety of different products. As this characteristic doesn't align with the characteristics of a perfectly competitive market, we can consider option 'b' as the correct answer. However, let's analyze the last option to make sure.
04

Analyze Option 'c' - Free entry into and exit from the market

In a perfectly competitive market, there is free entry and exit of firms. This means that any firm can enter the market and compete with existing firms or leave the market without any restrictions or barriers. Because this characteristic aligns with the characteristics of a perfectly competitive market, option 'c' does characterize a perfectly competitive market.
05

Analyze Option 'd' - Any of the above

Now that we have analyzed options 'a', 'b', and 'c', we know that option 'b' is not a characteristic of a perfectly competitive market. Since option 'd' says that none of the above options is a characteristic of a perfectly competitive market, we can conclude that option 'd' is incorrect.
06

Conclusion

Based on our analysis, the correct answer is option 'b' - A perfectly competitive market is not characterized by a great variety of different products. This is because a perfectly competitive market is characterized by homogeneous or identical products that are perfect substitutes for each other.

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Most popular questions from this chapter

The National Center for Education Statistics reported that \(47 \%\) of college students work to pay for tuition and living expenses. Assume that a sample of 450 college students was used in the study. a. Provide a \(95 \%\) confidence interval for the population proportion of college students who work to pay for tuition and living expenses. b. Provide a \(99 \%\) confidence interval for the population proportion of college students who work to pay for tuition and living expenses. c. What happens to the margin of error as the confidence is increased from \(95 \%\) to \(99 \% ?\)

The range for a set of data is estimated to be 36 a. What is the planning value for the population standard deviation? b. At \(95 \%\) confidence, how large a sample would provide a margin of error of \(3 ?\) c. At \(95 \%\) confidence, how large a sample would provide a margin of error of \(2 ?\)

In an effort to estimate the mean amount spent per customer for dinner at a major Atlanta restaurant, data were collected for a sample of 49 customers. Assume a population standard deviation of \$5. a. At \(95 \%\) confidence, what is the margin of error? b. If the sample mean is \(\$ 24.80\), what is the \(95 \%\) confidence interval for the population mean?

The average cost per night of a hotel room in New York City is \(\$ 273\) (SmartMoney, March 2009 . Assume this estimate is based on a sample of 45 hotels and that the sample standard deviation is \(\$ 65\) a. With \(95 \%\) confidence, what is the margin of error? b. What is the \(95 \%\) confidence interval estimate of the population mean? c. Two years ago the average cost of a hotel room in New York City was \(\$ 229 .\) Discuss the change in cost over the two-year period.

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