Pure competition is characterized by which of the following?Multiple select question.There are a considerable number of firmsThere is a standardized productIndividual sellers have considerable control over the product priceNew firms can enter and exit very quickly
Question
Pure competition is characterized by which of the following?Multiple select question.There are a considerable number of firmsThere is a standardized productIndividual sellers have considerable control over the product priceNew firms can enter and exit very quickly
Solution
Pure competition is characterized by:
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There are a considerable number of firms: This is true. In a purely competitive market, there are a large number of small firms, each of which contributes a very small proportion to the total output of the market.
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There is a standardized product: This is also true. In pure competition, the products offered by different firms are identical or very similar. This means that consumers have no preference for the product of one firm over another, except for the price.
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Individual sellers have considerable control over the product price: This is false. In pure competition, individual firms are price takers, not price makers. This means that they have no control over the price of the product, which is determined by the market as a whole.
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New firms can enter and exit very quickly: This is true. In a purely competitive market, there are no barriers to entry or exit. This means that new firms can enter the market easily if they see an opportunity for profit, and existing firms can exit the market easily if they are not making a profit.
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