Which of the following is NOT a basic assumption of perfect competition? A. Production is characterized by significant economies of scale. B. There is free entry and exit from the market. C. All firms produce identical, or nearly identical, products. D. All firms and consumers are price takers.

Question

Grace Hill

Business

19 December, 10:19

Which of the following is NOT a basic assumption of perfect competition? A. Production is characterized by significant economies of scale. B. There is free entry and exit from the market. C. All firms produce identical, or nearly identical, products. D. All firms and consumers are price takers.

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Answers (1)

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June Reynolds · Answer 1

Answer: Production is characterized by significant economies of scale is not an assumption of perfect competition (A)

Explanation:

A perfect competition is a form of market structure that has many buyers and may sellers. In a perfect competition, there is a free entry and exit for producers as there is no barrier.

Also, firms are price takers as no producer can influence the price of the goods in the market unlike in an imperfect competition which is a price maker as producers can influence price. Firms also sell identical products that are the same in quality, size etc.

In a perfect competition, production is not characterized by significant economies of scale. That is an assumption that can be found in monopoly.

Therefore, option A is the right answer.