[amp_mcq option1=”Large number of buyers and sellers” option2=”Homogeneous product” option3=”Freedom of entry” option4=”Absence of transport cost” correct=”option4″]<\/p>\n
The correct answer is D. Absence of transport cost.<\/p>\n
Pure competition is a market structure in which there are a large number of buyers and sellers, the product is homogeneous, there is freedom of entry and exit, and there are no transport costs.<\/p>\n
A large number of buyers and sellers ensures that no single buyer or seller can have a significant impact on the market price. Homogeneous products means that all products are identical, so buyers will not choose one seller over another based on the product itself. Freedom of entry and exit means that firms can easily enter or exit the market, which prevents firms from earning economic profits in the long run. Absence of transport costs means that buyers and sellers can trade with each other at no cost, which ensures that the market price is the same for all buyers and sellers.<\/p>\n
D. Absence of transport costs is not an essential condition of pure competition because even if there are transport costs, the market price will still be determined by the interaction of supply and demand. However, the presence of transport costs will create a wedge between the price that buyers pay and the price that sellers receive. This wedge will be equal to the cost of transportation.<\/p>\n","protected":false},"excerpt":{"rendered":"
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