Question

The market for tomatoes is A. monopolistically competitive because tomato farming has barriers to entry. B. an oligopoly because each tomato farmer produces a large share of the output. C. perfectly competitive because tomato farmers produce identical products. D. perfectly competitive because tomato farmers have market power. E. a monopoly because tomatoes have no close substitutes.

Answer 1

Answer: C. perfectly competitive because tomato farmers produce identical products.

Explanation: The market for tomatoes is perfectly competitive because tomato farmers produce identical products. A perfectly competitive market is a market structure where there are many buyers and sellers, with prices reflecting supply and demand. It is characterized by identical or undifferentiated products, no transaction costs, no barriers to entry and exit which ensures that capital and other resources are highly mobile, and perfect information about the market among others.