Multiple Choice
Which of the following factors is an assumption of perfect competition?
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11. Perfect Competition
Characteristics of Perfect Competition
Multiple Choice
Which condition is present in pure (perfect) competition but missing in monopolistic competition?
A
Free entry and exit
B
Homogeneous products
C
Firms are price makers
D
Many buyers and sellers
Verified step by step guidance1
Step 1: Understand the characteristics of pure (perfect) competition. These include many buyers and sellers, homogeneous products, free entry and exit, and firms being price takers.
Step 2: Understand the characteristics of monopolistic competition. These include many buyers and sellers, differentiated (heterogeneous) products, free entry and exit, and firms having some price-making power.
Step 3: Compare the two market structures to identify which condition is present in pure competition but missing in monopolistic competition.
Step 4: Note that both market structures have many buyers and sellers and free entry and exit, so these conditions are common to both.
Step 5: Recognize that the key difference is in the product type: pure competition has homogeneous products, while monopolistic competition has differentiated products. Therefore, the condition present in pure competition but missing in monopolistic competition is homogeneous products.
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