Question

Which statement best distinguishes perfect competition from pure competition?

Options

• Perfect competition allows monopoly power.

• Perfect competition adds perfect knowledge, factor mobility, no selling costs, and no transport costs to the three pure competition conditions.

• Pure competition requires more assumptions than perfect competition.

• Pure competition assumes government sets the price.

Answer 1

Perfect competition adds perfect knowledge, factor mobility, no selling costs, and no transport costs to the three pure competition conditions.

Explanation: 

Perfect competition is a wider concept that includes the three pure competition conditions plus additional assumptions like perfect knowledge, perfect factor mobility, and the absence of selling and transport costs.