Question:
Which combination of assumptions is consistent with these markets?
(1) Perfect: Homogeneous product / Monopolistic: Barriers to entry.
(2) Perfect: Differentiated products / Monopolistic: Homogeneous product.
(3) Perfect: Large number of sellers / Monopolistic: Small number of sellers.
(4) Perfect: Barriers to entry / Monopolistic: Perfect information.
(5) Perfect: Large number of sellers / Monopolistic: Differentiated products.
Correct Answer:
(5)
Answer Explanation:
Both Perfect Competition and Monopolistic Competition share the assumption of a “large number of sellers” and “free entry/exit”. Their primary difference lies in the product: Perfect Competition features identical (homogeneous) products, while Monopolistic Competition features differentiated products.
Topic: Market Structures Year: 2017
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