Question

3.

Which of the following statements is false?

	a.	The theory of perfect competition is completely and accurately descriptive of most real-world firms.
	b.	In perfect competition, the market price is established at the intersection of the market demand and market supply curves.
	c.	The perfectly competitive firm's demand curve is horizontal at the market price.
	d.	If Firm X does not strictly meet all the assumptions of the theory of perfect competition, but behaves as if it does, then the theory of perfect competition is relevant to it.

Answer 1

Option a

The theory of perfect competition is completely and accurately descriptive of most real-world firms

All the perfectly competitive market assumptions are not in any of the real world markets because the assumptions are very rare to be in reality at a time.

A perfectly competitive market has many firms with the same product and perfect information to consumers and no advertisement and the price is decided by the market equilibrium so the demand curve is horizontal. also, it has the P=MR=AR so the profit is maximum at P=MC.