Correct Response: B. A situation in which prices are closely determined based on the interaction of supply and demand is an example of perfect competition. The equilibrium price for a product is determined when supply equals demand. An oligopoly (A) is a market structure where a small number of sellers take over the market and collaborate to eliminate outside competitors. A monopoly (C) is a market structure where one firm takes over the entire market of a product, eliminating any form of competition. Monopolistic competition (D) involves multiple suppliers offering consumers closely substitutable or similar goods at varying price ranges. Because the products serve the same purpose there are less options for each seller to stand out from the others. In monopolistic competition, price varies depending on supplier and thus is not determined based on supply and demand.
