Which of the following is a limiting assumption of the model of perfect competition?

Question

There is significant brand loyalty amongst consumers.

All firms use the same production technology.

Each firm is slightly differentiated.

The goods are differentiated.

Answer 1

The correct answer is: There is significant brand loyalty amongst consumers.

In a model of perfect competition, it is assumed that products are homogeneous, meaning they are identical and there is no brand loyalty among consumers. This ensures that no single firm can influence the market price, as consumers will switch to other suppliers if any firm tries to raise its prices. The other options listed do not align with the assumptions inherent in the model of perfect competition.