Question

What is the consequence of a firm in a competitive market selling a homogenous product?

a. The firms capture some market power.
b. The product sold by one firm is a perfect substitute for the products sold by other firms in the same industry.
c. All the firms in the industry are the same size.
d. The product sold by one firm is a perfect complement for the products sold by other firms in the industry.
e. Firms in the industry can produce the same product with a different quantity of inputs.

Answer 1

The correct answer is letter "B": The product sold by one firm is a perfect substitute for the products sold by other firms in the same industry.

Step-by-step explanation:

Homogeneous products are those that cannot be differentiated one from another because they have similar features and satisfy the same need. They could even be sold at the same or nearly the same price. Under this scenario, these products are perfect substitutes from one another. Consumers will not be affected if one of the manufacturers decides to stop operations.