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30 April, 13:05

Why do economists study the perfectly competitive model?

A. It is an important model to use as a benchmark to compare with other market structures.

B. Many markets have similarities to the perfectly competitive model.

C. Perfectly competitive markets maximize societal welfare.

D. All of the above.

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  1. 30 April, 15:48
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    D. All of the above.

    Explanation:

    Their are many reasons why economists study the perfect competition model but we will focus on the options given and it is certified that all of them are the reason for this. Because it is used as a benchmark to compare with other market structures etc.

    Firms can enter and leave the market without any restrictions, therefore, there is free entry and exit into and out of the market.

    A perfectly competitive firm is known to be a price taker because the pressure of competing firms forces them to accept the prevailing equilibrium price in the market. If a firm in a perfectly competitive market raises the price of its product by so much as a penny, it will lose all of its sales to competitors.
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