What defines a market in economic terms?

A market is defined as an entire area where buyers and sellers of a commodity interact, allowing for sales and purchases, without the necessity of a physical location or face-to-face contact.

True or False: In a perfect competition market, a single seller can influence the market price significantly.

False. In perfect competition, a single seller cannot influence the market price due to the large number of buyers and sellers, making each participant a price-taker.

Fill in the blank: Perfect competition is characterized by a large number of buyers and sellers selling ___ goods at a ___ uniform price.

Homogeneous; single

What is the implication of having a large number of buyers and sellers in perfect competition?

The implication is that no individual buyer or seller has enough market power to influence the price, leading to uniform prices set by the forces of demand and supply.

Riddle: I exist where many compete, selling the same treat. No one controls the price, and everyone pays the same slice. What am I?

A perfect competition market.

What type of products are sold in a market characterized by perfect competition?

Homogeneous products, meaning the goods are identical in nature and can be substituted for one another.

Homogenous goods are characterized by being ___ and ___ in quality.

Identical and perfect substitutes

What is the implication of free entry and exit in a market?

It ensures that no firm can earn above-normal profits in the long run.

True or False: Perfect knowledge in a market leads to firms having cost advantages.

False. Perfect knowledge means no firm has a cost advantage.

Fill in the blank: A seller cannot charge high prices for homogenous goods because buyers can ___ the product from another seller.

Purchase

Riddle: I am a market condition where firms can enter or exit freely without barriers. What am I?

Free entry and exit

What does perfect mobility of factors imply in a market?

It allows resources to move freely to where they are most needed, ensuring efficiency.

What is the result of buyers having perfect knowledge about the product market?

They will not pay higher prices, leading to uniform pricing in the market.

What is the implication of free entry and exit in a perfectly competitive market regarding the supply of commodities?

The market supply of the commodity and factors of production are equal in all parts of the market, preventing shortages in some areas and excesses in others.

Fill in the blank: The demand curve in a perfectly competitive market is parallel to the ___-axis.

X

True or False: In a perfectly competitive market, firms are price makers who can set the price for their products.

False. Firms are price takers who accept the market price.

What happens to firms in a perfectly competitive market when they earn abnormal profits in the short run?

New firms are attracted to enter the industry due to the high market price and potential for profit.

Riddle: I have no walls, I allow resources to flow freely, and I ensure no transportation costs burden my firms. What am I?

A perfectly competitive market.

Fill in the blank: In a perfectly competitive market, every additional unit is sold at the prevailing price, which means ___ = ___ = ___ for the firm.

AR = MR = price

Explain why there cannot be a shortage of commodities in a perfectly competitive market.

Due to free entry and exit, resources move to where they are most rewarded, ensuring that supply meets demand across the market.

How does the assumption of no extra transportation costs affect the production process in a perfectly competitive market?

It allows firms to operate without the burden of additional costs, thereby enhancing efficiency and potentially lowering prices for consumers.

In a competitive market, the entry of more firms generally leads to ___ in product prices and ___ in factor prices such as rent and wages.

A fall in product prices and a rise in factor prices

What happens to abnormal profits in the long run when firms can freely enter and exit a market?

Abnormal profits will be driven to zero as firms enter the market, increasing supply and lowering prices until only normal profits are earned.