Question

A large city has nearly 500 restaurants, with new ones entering regularly as the population grows. The city decides to limit the number of restaurant licenses to 500. Which characteristics of this market are consistent with perfect competition and which are not?

Answer 1

The city having 500 restaurants, and the new ones entering regularly is an example of a perfect competition. This is where the industry involves several sellers as anyone can join the industry.

However, the aspect of limiting the number to 500 is not a characteristic of perfect competition.