Do the assumptions of the perfectly competitive model describe all real-world markets? Explain
What will be an ideal response?
No, the assumptions of perfect competition do not always hold in real-world markets. There are cases where the market fails to produce an efficient outcome. This situation can be due to a number of reasons such as imperfect competition or externalities.
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Which of the following is NOT a characteristic of a perfectly competitive market?
A) The products sold by the firms in the market are homogeneous. B) There are many buyers and sellers in the market. C) It is difficult for a firm to enter or leave the market. D) Each firm is a price taker.
In the circular flow diagram, which of the following is true in resource or factor markets?
(a) Households buy resources from business firms. (b) Households sell products to business firms. (c) Households sell resources to business firms. (d) Business firms and households resources are unlimited.