Which of the characteristics / assumptions listed below refer to Perfect Competition?
(Write True or False after each sentence.)
(i) The goods are homogenous / identical - Leaving Cert Economics - Question 2 - 2015
Question 2
Which of the characteristics / assumptions listed below refer to Perfect Competition?
(Write True or False after each sentence.)
(i) The goods are homogenous / ... show full transcript
Worked Solution & Example Answer:Which of the characteristics / assumptions listed below refer to Perfect Competition?
(Write True or False after each sentence.)
(i) The goods are homogenous / identical - Leaving Cert Economics - Question 2 - 2015
Step 1
(i) The goods are homogenous / identical.
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Answer
True. In perfect competition, one of the key characteristics is that the goods offered by sellers are identical or homogenous. This ensures that consumers do not prefer one seller's product over another.
Step 2
(ii) Barriers to entry exist in this market.
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Answer
False. Perfect competition is characterized by the absence of barriers to entry. This means that new firms can easily enter the market when they see an opportunity for profit.
Step 3
(iii) There are many buyers and sellers in the market.
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Answer
True. A defining feature of perfect competition is the presence of many buyers and sellers. This ensures that no single buyer or seller can influence the market price.
Step 4
(iv) The goods are close substitutes.
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Answer
False. In a perfectly competitive market, the goods are not close substitutes; they are identical. Close substitutes would imply some level of differentiation, which contradicts the concept of homogeneity.
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