A key assumption of the supply and demand model is that:
A) each firm's good is unique and cannot be duplicated by other firms in the market.
B) firms will continue to raise price until profits become positive.
C) each firm in the market produces an identical good.
D) each firm produces at a level of output at which price exceeds marginal cost.

Question

Quizplus · Accepted Answer

The supply and demand model assumes that each firm in the market produces an identical good, also known as a homogeneous product. This means that consumers do not have a preference for any particular firm's product over another. This assumption allows for perfect competition, where firms are price-takers and have no market power to influence the price of their product.

A Key Assumption of the Supply and Demand Model Is