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

CFA Level 1 Question of the Week: Market Structures

  • This topic has 7 replies, 7 voices, and was last updated Jan-18 by jatrigg1.
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    • exam_whiz
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      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?

      • Only statement I is incorrect
      • Both statements I and II are incorrect
      • Only statement III is incorrect
    • Goodyear
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      my bad, question clearly asks which is incorrect …an example of “RTFQ!”

    • shannondaily
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      Woo! I got it right. 

    • Zalucci
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      bummer, I read the answer choices wrong :s

    • RoyD
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      read it wrong too :

    • exam_whiz
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      Correct Answer:  C

      Firms in perfect competition are price takers, whereas firms in monopolistic competition face downward-sloping demand curves and are price searchers. Both the statements made by Jim are correct.

    • krishTa
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      Read the options wrong 🙁

    • jatrigg1
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      Read it wrong too

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