In a perfect competitive market setting,which of the following would be a true statement?
a)market price automatically sets itself exactly at equilibrium
b)market price rarely trends toward the equilibrium value
c)wage rates trend toward marginal revenue product levels
d)wage rates mirror marginal revenue product levels exactly
a,b,d
Wage rates trend toward marginal revenue product levels.
In a perfectly competitive market setting, the true statement would be:
a) Market price automatically sets itself exactly at equilibrium.
In a perfect competition, the forces of supply and demand establish equilibrium, where the quantity demanded by consumers matches the quantity supplied by producers. This equilibrium price is determined by the market and adjusts until supply and demand are in balance.
In a perfectly competitive market setting, the most accurate statement would be:
a) Market price automatically sets itself exactly at equilibrium.
Explanation:
In a perfectly competitive market, there are a large number of buyers and sellers who have no ability to influence the market price. Each participant in the market takes the price as given and adjusts their behavior accordingly. This means that there is a natural equilibrium point where the quantity demanded equals the quantity supplied, and the market price naturally settles at that equilibrium level.
To determine the equilibrium price and quantity, you can analyze the market's supply and demand curves. The point where these curves intersect represents the equilibrium. At this point, the price is set in a way that clears the market, meaning that all goods or services produced are sold and there are no unsatisfied buyers or sellers.
It's important to note that in a perfectly competitive market, the equilibrium price may change due to shifts in demand or supply. However, market forces will always drive the price towards the new equilibrium level.
Options (b), (c), and (d) are not accurate because they don't align with the characteristics of a perfectly competitive market. Wage rates, for example, are determined by various factors including supply and demand for labor, worker productivity, and other market conditions. They may not directly mirror the marginal revenue product levels.