Question

Americans spend more money on strawberries than any other fresh fruit except apples and most of these strawberries are produced in California. Suppose the Sumner Strawberry Farm is a typical California strawberry farm. The Sumner farm leases 50 acres of strawberry fields and waters the fields using an elaborate drip irrigation system. The cost of leasing the farm and its equipment is $350 thousand a year. Mr. Sumner also has to hire farm workers to harvest the fields and package the strawberries for the market. Strawberry pickers in California are hired at will, meaning that Mr. Sumner can fire strawberry pickers at any time without explanation.

For the rest of the questions about strawberries, assume that the market for strawberries is perfectly competitive. If so, which of the following is NOT a characteristic of strawberry markets?

A. Strawberry farms are price takers.
B. Strawberry farms have difficulty entering the market.
C. There are many sellers of strawberries.
D. Strawberries from different farms are largely the same.

Answer 1

In a perfectly competitive market, strawberry farms in California like Sumner Strawberry Farm are price takers, face many sellers, and offer homogeneous products. The characteristic that does NOT apply is difficulty entering the market, typically seen in non-competitive markets.

Step-by-step explanation:

Given that the market for strawberries is perfectly competitive, it's important to analyze which characteristic does NOT apply to strawberry markets. In a perfectly competitive market, firms or farms like Sumner Strawberry Farm are price takers, meaning they accept the market price that is determined by the interplay of supply and demand. This is true for strawberry markets, where individual farms cannot influence the market price due to the product being relatively homogenous and there being many sellers. Therefore, option A is not the correct answer. Furthermore, an element characteristic of a perfectly competitive market is the ease of entry and exit.

This means that while there may be practical challenges, there are no significant market barriers to start strawberry farming, so option B would be the correct characteristic that does NOT apply to strawberry markets. The reasons for this could include the high cost of land, specialized equipment, and the expertise required to start a farm. Option C points out that there are many sellers of strawberries, which is another defining feature of perfect competition, implying that no single seller can control the price. Lastly, option D states that strawberries from different farms are largely the same, highlighting product homogeneity, which is indeed a characteristic of a perfectly competitive market, where products are standardized and consumers do not differentiate between products based on the producer.