Question

In: Finance

Which of the following are characteristics of a perfectly free economy? A. All buyers and sellers...

Which of the following are characteristics of a perfectly free economy?

A. All buyers and sellers can freely and immediately enter or leave the market.

B. There are numerous buyers and sellers, none of whom has a substantial share of

the market.

C. Every buyer and seller has full and perfect knowledge of what every other buyer

and seller is doing, including knowledge of the prices, quantities, and quality of

all goods being bought and sold.

D. All of the above

A. and B. only

Solutions

Expert Solution

All of the above are characteristics of a perfectly free economy. Hence, Option "D" is correct.

There are other characteristics of perfectly free economy, which are:

1. The goods being sold in the market are so similar to each other that no one cares from whom each buys or sells.

2. The costs and benefits of producing or using the goods being exchanged are borne entirely by those buying or selling the goods and not by any other external parties.

3. All buyers and sellers are utility maximizers: Each tries to get as much as possible for as little as possible.

4. No external parties (such as the government) regulate the price, quantity, or quality of any of the goods being bought and sold in the market.


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