The perfectly competitive model assumes that:

Question

Quizplus · Accepted Answer

The assumption that firms can enter and exit the industry with relative ease is a key characteristic of the perfectly competitive model. This means that there are no barriers to entry, and new firms can enter the market in response to profits being made by existing firms, ultimately leading to a situation where no one firm can control the market price. A is wrong because in a perfectly competitive market, no individual seller can influence the market price. B is wrong because raising prices in a perfectly competitive market would result in a decrease in demand for that seller's product, ultimately leading to a loss in revenue, not an increase. D is wrong because firms in a perfectly competitive market are assumed to sell identical products, and so variation in quality would be minimal.

The Perfectly Competitive Model Assumes That