Within which market structure do numerous buyers and sellers engage in trade across a spectrum of prices rather than a singular market price?

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BlackTom AI · Accepted Answer

In this question, we’re evaluating market structures and how prices are determined across a market with many participants.
Option 1: Oligopolistic competition. This describes a market with a few large sellers who may engage in strategic behavior and interdependent pricing. It does not match the description of many buyers and sellers across a spectrum of prices.
Option 2: Pure competition. Here there are many sellers, but the products are homogeneous and price-taking behavior leads to a single market price. The emphasis is on a uniform price, not a spectrum of prices due to differentiation.
Option 3: The dominant firm model. This scenario features one large firm that sets the price and other smaller firms following, often in an imperfectly competitive setting; it does not involve numerous buyers and sellers with a wide price range.
Option 4: Pure monopoly. A single seller dominates the market and controls the price, leaving little to no competition and a single price level, which contradicts a spectrum of prices across many participants.
Option 5: Monopolistic competition. This structure includes many buyers and sellers, and each firm sells differentiated products. Because of product differentiation, prices vary across firms and over a range rather than aligning at one market price. This creates a spectrum of prices rather than a singular market price.
Therefore, the statement that describes numerous buyers and sellers trading across a spectrum of prices is best captured by monopolistic competition.

MKTG1199 LF03 - In-class Test 2

Within which market structure do numerous buyers and sellers engage in trade across a spectrum of prices rather than a singular market price?

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