An individual seller typically has very little control over the price he/she receives for their product at a given point in this type of market

An individual seller typically has very little control over the price he/she receives for their product at a given point in this type of market

• A. Purely competitive
• B. Monopolistic
• C. Oligopolistic
• D. Monopsony

Answer: (A)

In a purely competitive market, there are many sellers offering the same product, with no barriers to entry. Because each individual seller is just a tiny part of the total supply, the going price is set by overall supply and demand in the market, not by any one seller. Each seller is a price taker, facing a horizontal demand curve at the market price: if they try to charge more, buyers switch to other sellers; if they charge less, they don’t gain extra price and just sell more at the same market price. So, at a given moment, the price the seller receives is effectively determined by the market, leaving the seller with very little control.

In a purely competitive market, there are many sellers offering the same product, with no barriers to entry. Because each individual seller is just a tiny part of the total supply, the going price is set by overall supply and demand in the market, not by any one seller. Each seller is a price taker, facing a horizontal demand curve at the market price: if they try to charge more, buyers switch to other sellers; if they charge less, they don’t gain extra price and just sell more at the same market price. So, at a given moment, the price the seller receives is effectively determined by the market, leaving the seller with very little control.