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Which of the following is not a condition of perfect competition?
- a)A large number of firms.
- b)Perfect mobility of factors.
- c)Informative advertising to ensure that consumers have good information.
- d)Freedom of entry and exit into and out of the market.
Correct answer is option 'C'. Can you explain this answer?
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Which of the following is not a condition of perfect competition?a)A l...
Explanation:
Perfect competition is a market structure characterized by a large number of small, independent firms producing homogeneous goods or services. In perfect competition, there are certain conditions that need to be met. Let's examine each option to determine which one is not a condition of perfect competition.
A. A large number of firms:
In perfect competition, there is a large number of firms operating in the market. This ensures that no single firm has control over the market and that each firm has a negligible impact on the market price. This condition promotes competition and prevents any single firm from exerting market power.
B. Perfect mobility of factors:
Perfect mobility of factors refers to the ability of resources, such as labor and capital, to move freely between different firms and industries. In perfect competition, there are no barriers to entry or exit, allowing resources to flow freely based on market demand. This condition ensures that firms can easily adjust their production levels and that resources are allocated efficiently.
C. Informative advertising to ensure that consumers have good information:
This option is not a condition of perfect competition. In perfect competition, firms produce homogeneous goods or services, meaning they are identical and indistinguishable from one another. Therefore, there is no need for informative advertising as consumers do not have to differentiate between products. In fact, advertising expenses can be seen as a form of product differentiation, which goes against the conditions of perfect competition.
D. Freedom of entry and exit into and out of the market:
In perfect competition, there are no barriers to entry or exit. This means that new firms can easily enter the market if they see an opportunity for profit, and existing firms can exit if they are unable to compete or face losses. This condition ensures that the market remains competitive and that inefficient firms are replaced by more efficient ones.
Therefore, the correct answer is option C. Informative advertising to ensure that consumers have good information.
Perfect competition is a market structure characterized by a large number of small, independent firms producing homogeneous goods or services. In perfect competition, there are certain conditions that need to be met. Let's examine each option to determine which one is not a condition of perfect competition.
A. A large number of firms:
In perfect competition, there is a large number of firms operating in the market. This ensures that no single firm has control over the market and that each firm has a negligible impact on the market price. This condition promotes competition and prevents any single firm from exerting market power.
B. Perfect mobility of factors:
Perfect mobility of factors refers to the ability of resources, such as labor and capital, to move freely between different firms and industries. In perfect competition, there are no barriers to entry or exit, allowing resources to flow freely based on market demand. This condition ensures that firms can easily adjust their production levels and that resources are allocated efficiently.
C. Informative advertising to ensure that consumers have good information:
This option is not a condition of perfect competition. In perfect competition, firms produce homogeneous goods or services, meaning they are identical and indistinguishable from one another. Therefore, there is no need for informative advertising as consumers do not have to differentiate between products. In fact, advertising expenses can be seen as a form of product differentiation, which goes against the conditions of perfect competition.
D. Freedom of entry and exit into and out of the market:
In perfect competition, there are no barriers to entry or exit. This means that new firms can easily enter the market if they see an opportunity for profit, and existing firms can exit if they are unable to compete or face losses. This condition ensures that the market remains competitive and that inefficient firms are replaced by more efficient ones.
Therefore, the correct answer is option C. Informative advertising to ensure that consumers have good information.
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Which of the following is not a condition of perfect competition?a)A large number of firms.b)Perfect mobility of factors.c)Informative advertising to ensure that consumers have good information.d)Freedom of entry and exit into and out of the market.Correct answer is option 'C'. Can you explain this answer?
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