What is true of a perfectly competitive market?
A. The conditions do not exist in reality.
B. The problem of scarcity does not exist.
C. The market share varies by firm.
D. There are significant barriers to entry.
Is it A?
Yes, the correct answer is A. The conditions of a perfectly competitive market do not exist in reality. A perfectly competitive market is a theoretical market structure that serves as a benchmark for analyzing real-world market scenarios, but it is not often found in practical economic situations.
To explain how to arrive at this answer, let's analyze the other options:
B. The problem of scarcity still exists in a perfectly competitive market. Scarcity refers to the limited availability of resources in relation to unlimited wants and needs, and this problem is present in all market structures, including perfectly competitive markets.
C. In a perfectly competitive market, firms have no control over the market share. Each firm is small relative to the market and sells an identical product, so market shares do not vary by firm. Therefore, this statement is not true for a perfectly competitive market.
D. Perfectly competitive markets have very low barriers to entry, meaning it is relatively easy for new firms to enter the market. This characteristic distinguishes perfect competition from other market structures, such as monopolies or oligopolies, which typically have significant barriers to entry. Thus, this answer is not accurate for a perfectly competitive market.
In summary, option A stating that the conditions of a perfectly competitive market do not exist in reality is the correct answer.