Question

Perfect competition is (LO4) a) the prevalent form of competition in the United States b) the only form of competition in the United States c) found occasionally d) probably impossible to find

Short answer

The correct answer is (c) "Found occasionally". This is because while perfect competition is largely a theoretical construct and difficult to find in its complete form, it is not entirely impossible. In the United States' marketplace, some industries such as agriculture come close to the conditions of perfect competition, making it a rare but occasionally observable phenomenon.

Step-by-step solution

Definition of Perfect Competition

Firstly, perfect competition is a theoretical market structure. It is characterized by the following: (1) all firms sell an identical product (2) all firms are price takers (3) all firms have a relatively small market share (4) buyers have complete information about the product being sold and the prices charged by each firm, and (5) the industry is characterized by freedom of entry and exit.

Evaluation of Option (a)

This statement indicates that perfect competition is the most common form of competition in the United States. While there are sectors where competition is robust, it would be incorrect to suggest that perfect competition, as defined theoretically, is the dominating market structure in the United States. Many industries are characterized by differentiated products, significant barriers to entry, and incomplete information; all indications of less than 'perfect' competition.

Evaluation of Option (b)

This statement suggests that perfect competition is the only form of competition in the United States. This would not be accurate because clear and observable market structures range from pure monopoly to monopolistic competition and oligopoly that all sit alongside instances of more 'perfect' competition.

Evaluation of Option (c)

The statement implies that perfect competition can be found occasionally in the United States' market. This is relatively accurate as some industries, like agriculture, can approach perfect competition more closely than others. However, there are very few, if any, industries that can fulfill every condition of the model of perfect competition.

Evaluation of Option (d)

This statement suggests that perfect competition is impossible to find. While a perfectly competitive market structure is largely a theoretical construct and difficult to find in its pure form, it is not completely impossible. There are industries, as previously mentioned, that closely align with the conditions of perfect competition.

Answer Selection

Based on the understanding of perfect competition and evaluating the validity of each statement in relation to real-world conditions, option (c) "Found occasionally" is the best answer. This is a more realistic representation of perfect competition's presence within the United States' marketplace.