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CFA Level 1 Question of the Week: Market Structures

exam_whizexam_whiz IllinoisPosts: 68 Sr Associate
edited November 2014 in Level 1 Questions
Jim Marsh, CFA and Katherine Shipley, are discussing the various types of market structures and their characteristics. During their discussion, Jim makes the following statements:

I: “Perfect competition assumes that all the firms in the market produce identical products, there are a large number of independent firms and there are no barriers to entry or exit.”
II: “Perfect competition also assumes that each seller is small relative to the size of the total market.”

Katherine says,

III: “Firms in perfect competition are price searchers, whereas firms in monopolistic competition face downward-sloping demand curves and are price takers.”

Which of the statements made by Jim and Katherine is/are most likely incorrect?

CFA Level 1 Question of the Week: Market Structures 60 votes

Only statement I is incorrect
6%
krishTaabrahmb2apazrdx 4 votes
Both statements I and II are incorrect
18%
GoodyearRoyDrsparksTeemoZalucciEprak22pranshjatrigg1knarf1bvanove12chrupek 11 votes
Only statement III is incorrect
75%
hairyfairyexam_whizmaboi_1dadesantolmalkadhiwm247jmsatchwellPiaRandallK27jak5189natigcolumbiasimply_complex2toonervaslanderkinblack55555shannondailyunfer11amgbattbdb89maxnyc 45 votes
shannondaily

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