3.1.5.2 Competitive markets

• What is a competitive market characterized by?

  Many buyers and sellers
• The products sold by different firms in a competitive market are identical.

  True
• What type of information do buyers and sellers have in a competitive market?

  Perfect information
• Arrange the key characteristics of a competitive market in a logical order.

  1️⃣ Many buyers and sellers

  2️⃣ Homogeneous product

  3️⃣ Perfect information

  4️⃣ Free entry and exit
• What determines the equilibrium price and quantity in a competitive market?

  Demand and supply
• Buyers in a competitive market are indifferent between products from different sellers.


  True
• If the market price is above the equilibrium price, there will be a surplus, causing the price to fall.

  True
• What determines the equilibrium price and quantity in a competitive market?

  Demand and supply
• Buyers in a competitive market are indifferent between products from different sellers.


  True
• Market equilibrium occurs when the quantity demanded equals the quantity supplied
• The price mechanism is the process by which supply and demand drive the market to equilibrium
• Match the concept with its description:

  Equilibrium Price ↔️ Price where demand equals supply

  Price Mechanism ↔️ Process driving market to equilibrium
• Buyers increase demand when prices fall
• What is the price mechanism called in competitive markets?

  Market-clearing process
• What happens to the price of apples if there is a shortage due to a poor harvest?

  Price rises
• In a competitive market, the products sold by different firms are identical
• Match the characteristic with its description:

  Many buyers and sellers ↔️ No single entity influences price

  Homogeneous product ↔️ Products sold are identical

  Perfect information ↔️ Complete knowledge about prices
• What determines the equilibrium price and quantity in a competitive market?

  Demand and supply
• What happens to the price if the market price is below the equilibrium price in a competitive market?

  Price rises
• The price mechanism in a competitive market ensures that the equilibrium price is reached where the quantity demanded equals the quantity supplied
• If the market price is above the equilibrium price, there will be a surplus.


  True
• The price mechanism in a competitive market leads to an efficient allocation of resources
• Market equilibrium occurs when there is no surplus or shortage in the market.


  True
• If supply exceeds demand, the price will fall
• How does the price mechanism ensure an efficient allocation of resources in competitive markets?

  Balances supply and demand
• In a competitive market, buyers and sellers are price takers.


  True
• In a competitive market, resources are allocated to their most productive uses
• The lack of regulation in competitive markets can lead to negative externalities.


  True
• The requirement for homogeneous products in competitive markets can limit product differentiation
• In a competitive market, no single buyer or seller can influence the market price
• In a competitive market, firms can freely enter or exit the market
• The characteristics of a competitive market lead to an efficient allocation of resources.


  True
• In a competitive market, both buyers and sellers are price takers
• What ensures that the equilibrium price is reached in a competitive market?

  Price mechanism
• What type of entry and exit do firms have in a competitive market?

  Free entry and exit
• In a competitive market, buyers are price takers
• What ensures that the equilibrium price is reached in a competitive market?

  Price mechanism
• If demand exceeds supply, the price rises in a competitive market.


  True
• What is the definition of equilibrium price?

  Price where demand equals supply
• When does market equilibrium occur?

  Demand equals supply