Question

What are the conditions necessary for pure competition? A) Perfect knowledge B) Identical products C) Very large numbers of buyers and sellers D) Freedom of entry and exit E) Perfect resource mobility

Answer 1

The conditions for pure competition are perfect knowledge, identical products, a very large number of buyers and sellers, freedom of entry and exit, and perfect resource mobility.

Step-by-step explanation:

The conditions necessary for pure competition include:

• Perfect knowledge where sellers and buyers possess all the relevant information to make rational decisions about the products being traded.
• Identical products meaning that the products offered by different firms are homogeneous and indistinguishable from one another.
• A market with a very large number of buyers and sellers ensures that no single buyer or seller can influence the market price or terms of exchange.
• Freedom of entry and exit which allows firms to enter and leave the market without facing significant barriers or costs.
• Lastly, perfect resource mobility ensures that factors of production such as labor and capital can be moved freely from one firm to another without cost or other restrictions.

Answer 2

Perfect competition is a market structure with many sellers offering identical products and easy entry and exit of firms. The conditions necessary for pure competition include perfect knowledge, identical products, large numbers of buyers and sellers, and freedom of entry and exit.

Step-by-step explanation:

Perfect competition is a market structure in which many sellers are offering identical products, with easy entry and exit of firms. The conditions necessary for pure competition include:

Perfect knowledge: Sellers and buyers have all the relevant information to make rational decisions about the product being bought and sold.

Identical products: Many firms produce identical products, meaning there are no differentiation or branding strategies.

Large numbers of buyers and sellers: Many buyers are available to buy the product, and many sellers are available to sell the product.

Freedom of entry and exit: Firms can freely enter and leave the market without any restrictions, allowing for competition and market dynamics.

These conditions ensure that no single firm has control over the market and that firms are price takers, meaning they have no power to influence the market price.