Perfect competition:
A)in its purest form is probably difficult to observe in the real world because even such factors as location can lead to some market power.
B)is only observed where there are some barriers to entry in the industry.
C)requires each of the few firms in the industry to behave in the same profit-maximizing fashion.
D)only exists in differentiated product markets

Question

Quizplus · Accepted Answer

Perfect competition is a market structure where no single participant has market power, meaning each firm in the industry is a price taker. However, in the real world, it may not be possible to observe perfect competition in its purest form as factors like location and information asymmetry can give some firms a slight advantage and hence, some degree of market power. Perfect competition is difficult to observe in the real world because even minor differences such as location can lead to some market power. In a perfect competition market, there are no barriers to entry for firms, and each firm must behave in a profit-maximizing fashion. Differentiated products are not allowed in a perfectly competitive market.

Perfect Competition