Multiple Choice
Why is pure competition considered an unsustainable system in the long run?
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11. Perfect Competition
Characteristics of Perfect Competition
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Join thousands of students who trust us to help them ace their exams!Watch the first videoMultiple Choice
Which of the following is NOT a characteristic of pure (perfect) competition?
A
There is free entry and exit in the market
B
Products are differentiated
C
Firms are price takers
D
There are many buyers and sellers
Verified step by step guidance1
Step 1: Understand the characteristics of pure (perfect) competition. These typically include: many buyers and sellers, homogeneous (identical) products, free entry and exit in the market, and firms being price takers.
Step 2: Analyze each option given in the problem against these characteristics.
Step 3: Identify that 'There is free entry and exit in the market' matches the characteristic of free market entry and exit in perfect competition.
Step 4: Recognize that 'Firms are price takers' aligns with the fact that individual firms cannot influence the market price in perfect competition.
Step 5: Note that 'Products are differentiated' contradicts the characteristic of homogeneous products in perfect competition, making it the option that is NOT a characteristic of pure competition.
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