Question

Which one of the following is not a condition of perfect competition?

a. All goods sold in the market are identical

b. Producers can freely enter or exit the market

c. Buyers and sellers have perfect information

d. Numerous small buyers and sellers

e. Firms’ production functions display increasing returns

.

In a perfectly competitive market, every individual seller is a price taker, which means that

a. they face a perfectly inelastic demand curve.

b. any seller that raises its price above the market price takes all the customers.

c. each seller has some market power.

d. the price is determined by the interaction of market supply and demand.

Answer 1

Features of perfect competitive market:-

1) in perfect competitive market, there are many number of sellers and buyers which turns the market into most efficient market.

2) in this, consumers have full knowledge of the product which again makes it effiecient.

3) no price discrimination is done in this market.

.4) there are no barriers to entry and exit by the firms in this market as if firms are earning losses then it may exit the firm easily and if firms are earning super profits then more firms can enter into the industry also.

5) firms are generally price taker

Answer 1:- option D.

Becuase there are many number of sellers and buyers in this market.

Answer 2:- option D.

Because, the price in the perfect competitive makret is defined by the interaction of market demand and supply.