price taker?","back":"Their output is too small relative to the total market to influence the ruling market price.","points":1,"mcqOptions":[{"text":"Their output is too small relative to the total market to influence the ruling market price.","correct":true,"explanation":"Each firm supplies only a negligible share of total market output, so changing its own production cannot affect market supply enough to alter the equilibrium price."},{"text":"Their output is too large relative to the total market for other sellers to influence the ruling market price.","correct":false,"explanation":"A firm producing a large share of market output may possess market power. A perfectly competitive firm is a price taker because its output is small relative to total market output."},{"text":"Their output is too specialised relative to the total market for consumers to compare it with the ruling market price.","correct":false,"explanation":"Specialisation or differentiation would give a firm some control over price. Price-taking instead results from each firm’s output being too small to influence the overall market."},{"text":"Their price is fixed by the government, preventing the seller from changing the ruling market price.","correct":false,"explanation":"Perfect competition does not depend on government price controls. The market determines the price, and each firm must accept it because its individual output is negligibly small."}]},{"id":"310120db-2506-412e-85f4-3882f96db6f3","cardType":"basic","front":"Why are products in perfect competition considered perfect substitutes?","back":"Goods are homogeneous, meaning they are identical with no branding or differentiation.","points":1,"mcqOptions":[{"text":"Goods are homogeneous, meaning they are identical with no branding or differentiation.","correct":true,"explanation":"Homogeneous goods have identical characteristics, so consumers view every firm’s product as interchangeable. There is therefore no non-price reason to prefer one seller’s product."},{"text":"Goods are heterogeneous, meaning they differ in quality and carry distinct branding or differentiation.","correct":false,"explanation":"Heterogeneous goods are differentiated rather than perfect substitutes, allowing consumers to prefer particular sellers. Perfectly competitive goods are homogeneous, with no branding or product differences."},{"text":"Goods are complementary, meaning they are normally purchased together rather than chosen as alternatives.","correct":false,"explanation":"Complementary goods are consumed together, not substituted for one another. Products in perfect competition are perfect substitutes because they are homogeneous and indistinguishable between firms."},{"text":"Goods are price controlled, meaning they must be sold at identical prices with no discounts or variation.","correct":false,"explanation":"A common market price does not make products perfect substitutes, nor is government control required. They are substitutes because the goods themselves are homogeneous, unbranded and identical."}]},{"id":"2a8f49f2-5ac4-4a72-90ac-d5d7db8484ca","cardType":"basic","front":"Why is the demand curve for an individual firm in this market perfectly elastic?","back":"Because products are identical and info is perfect, a firm loses all sales if it raises price above the market rate.","points":2,"mcqOptions":[{"text":"Because products are identical and info is perfect, a firm loses all sales if it raises price above the market rate.","correct":true,"explanation":"Buyers know the market price and can purchase an identical product elsewhere. Any firm charging more therefore loses every customer, making its demand perfectly elastic at the market price."},{"text":"Because products are identical and info is perfect, a firm loses only a few sales if it raises pri

1.5.3 Perfect competition

1.5.3 Perfect competition Flashcards

1.5.3 Perfect competition

1.5.3 Perfect competition Flashcards