Which of the Following Is NOT an Assumption of the Classical

question 144

Multiple Choice

Which of the following is NOT an assumption of the classical model?

• A) Pure competition.
• B) Wages and prices are flexible.
• C) People are motivated by self-interest.
• D) Wage rigidity.

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Definitions:

Potentially Efficient

A condition indicating that a system or process could achieve maximum productivity with minimum waste or expense, but hasn't yet done so.

Consumer Surplus

The gap between the amount customers are prepared to spend on a product or service and the amount they end up paying.

Producer Surplus

The difference between the amount producers are willing to accept for a good or service versus what they actually receive.

P = MC

An economic principle stating that the optimal level of output occurs when the price (P) equals marginal cost (MC), guiding firms in perfect competition on production decisions.