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Microeconomics

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Assumptions of Perfect Competition in the Long Run

MICRO-JNVEKK

Models of perfect competition make a number of assumptions that lead to certain results.

Which assumption of perfect competition is most important for the result that firms obtain zero economic profits in the long run?

A

The assumption that firms face “horizontal demand curves”.

B

The assumption that there is free entry into the market.

C

The assumption that goods in the market are homogenous.

D

The assumption that there are many small firms competing fiercely with each other.