Asked by Ashley Young on Jun 18, 2024
Verified
Under perfect competition there must be
A) perfect mobility of resources and perfect knowledge.
B) neither perfect mobility nor perfect knowledge.
C) perfect mobility but not perfect knowledge.
D) perfect knowledge but not perfect mobility.
Perfect Mobility
An economic condition where factors of production such as labor and capital can be easily moved across industries or geographies without costs or barriers.
Perfect Knowledge
A hypothetical situation in which all parties in the market have complete and absolute information about the market conditions and variables.
- Examine the role of perfect mobility of resources and perfect knowledge in defining a perfectly competitive market.
Verified Answer
KS
Kalla SubodhJun 25, 2024
Final Answer :
A
Explanation :
In perfect competition, there must be perfect mobility of resources since firms can easily enter or exit the market. Moreover, there must also be perfect knowledge about the market conditions, such as the price of the product and the available supply and demand, to ensure that all firms can make rational decisions. Therefore, option A is the correct choice.
Learning Objectives
- Examine the role of perfect mobility of resources and perfect knowledge in defining a perfectly competitive market.