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

Question

Each firm is a pure price taker.

Each firm is slightly differentiated.

There is significant brand loyalty amongst consumers.

Each firm is a pure price maker.

Answer 1

The correct answer is:

Each firm is a pure price taker.

In a perfect competition model, firms are considered price takers because they cannot influence the market price of their product; they must accept the market price as given. The other options mentioned, such as product differentiation, brand loyalty, and price-making ability, do not align with the assumptions of a perfectly competitive market.