Question

What is the market where both consumer and firms are price takers called?

• A. Monopoly
• B. Perfect competition
• C. Oligopoly
• D. None of these

Hint:

In perfect competition, all firms sell identical products, and no single firm has the ability to influence market prices.

Answer 1

The Correct Option is B

Step 1: Understanding the market types.
In economics, the type of market determines the pricing power of consumers and firms. A market where both consumers and firms are price takers is characterized by perfect competition. In this market, no single firm can influence the price, and all firms sell identical products.

Step 2: Analyzing the options.
(A) Monopoly: Incorrect. In a monopoly, one firm controls the entire market and can set prices, so consumers and other firms are not price takers.
(B) Perfect competition: Correct. In perfect competition, many firms sell identical products, and both consumers and firms must accept the market price, making them price takers.
(C) Oligopoly: Incorrect. In an oligopoly, a few firms dominate the market, and they may have some control over pricing.
(D) None of these: Incorrect, as the correct answer is (B) Perfect competition.

Step 3: Conclusion.
A market where both consumers and firms are price takers is called perfect competition.