One Assumption of the Perfectly Competitive Model Is That of Free

question 48

Multiple Choice

One assumption of the perfectly competitive model is that of free entry.This assumption most directly leads to the implication that:

• A)firms will spend significant amounts of money on advertising.
• B)positive economic profits will only be possible for in the short run.
• C)firms will compete on the basis of better service and amenities rather than price.
• D)a single firm will emerge as the industry leader.

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Definitions:

Production Possibilities Curve

A graphical representation that shows the different combinations of two goods or services that can be produced within a given resource constraint.

Fully Employed

A situation in which all available labor resources are being used in the most economically efficient way.

Production Possibilities Frontier

Represents the maximum potential output of two goods or services an economy can produce when all resources are used efficiently, graphically illustrating opportunity costs and economic efficiency.

Outputs

The goods or services produced by a company or an economy over a certain period of time.