Question

Which of the following assumptions about a perfectly competitive market structure is/are not valid in the case of a monopoly?

• A. There should exist a very large number of firms so that the actions of a single buyer or seller have a negligible effect
• B. Free entry and exit
• C. Outputs produced by all the firms are indistinguishable from each other
• D. The consumers and firms have perfect knowledge of the output, inputs and their prices

Answer 1

Answer: (A), (B)

The correct options are
A

There should exist a very large number of firms so that the actions of a single buyer or seller have a negligible effect

B

Free entry and exit

In a perfectively competitive market structure, firms are price takers. For this, there should be a large number of sellers as well as free entry and exit.