ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Perfect competition is a hypothetical market structure in which there are very many firms, each of which represents an infinitesimal share of the market. In a perfectly competitive market, if any firm is able to earn an economic profit, other firms will immediately enter the market, driving economic profit to zero.

Detailed explanation-2: -What Is Perfect Competition? In economic theory, perfect competition occurs when all companies sell identical products, market share does not influence price, companies are able to enter or exit without barriers, buyers have perfect or full information, and companies cannot determine prices.

Detailed explanation-3: -Common barriers to entry include special tax benefits to existing firms, patent protections, strong brand identity, customer loyalty, and high customer switching costs. Other barriers include the need for new companies to obtain licenses or regulatory clearance before operation.

Detailed explanation-4: -Perfect competition is a type of marketplace where multiple companies are selling the same product or service, and a large number of consumers are looking to purchase it. None of these companies have the power to set a price for that product or service without losing business to other competitors.