18. In competitive markets, which of the following statements is true?
Answer: D
The market price is determined by the interaction of many buyers and many sellers.
In competitive markets, the market price is established through the dynamics of supply and demand, where numerous buyers and sellers interact, influencing the price based on their purchasing and selling decisions.
A) The problem of scarcity does not exist.
This statement is incorrect as scarcity is a fundamental economic problem that arises because resources are limited while human wants are unlimited. In competitive markets, scarcity still exists and influences pricing and availability of goods.
B) The market price is determined by a single seller.
This option is incorrect because it describes a monopoly rather than a competitive market. In a competitive market, prices are not set by one seller but rather through the collective actions of multiple sellers and buyers.
C) The market price is determined by a few large sellers.
This statement misrepresents the nature of competitive markets, which are characterized by many participants. A few large sellers would indicate an oligopoly, where price determination does not reflect the competitive market dynamics.
D) The market price is determined by the interaction of many buyers and many sellers.
This option is correct as it accurately describes the fundamental principle of how prices are set in competitive markets. The interaction among numerous buyers and sellers ensures that prices fluctuate based on supply and demand.
Conclusion
The correct answer, D, effectively captures the essence of price determination in competitive markets, highlighting the role of numerous market participants. Options A, B, and C fail as they misinterpret the dynamics of competition, either by denying scarcity or mischaracterizing the market structure.