ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -There is little differentiation between each of their products, as they use the same recipe, and they each sell them at an equal price. At the same time, sellers are few and free to participate in the market without any barrier.

Detailed explanation-2: -The statement mentioned is false. Product differentiation is introducing new products to reach a wider range of customers. It makes the product unique for the targeted audience.

Detailed explanation-3: -In other words, the product of each and every firm in a perfectly competitive market is a perfect substitute to others’ products in terms of quantity, quality, colour, size, features, etc. Therefore, product differentiation is not possible under perfect competition.

Detailed explanation-4: -In the perfect or pure competition market, there are a large number of firms each producing the same product (as called a standardized or homogeneous product).

Detailed explanation-5: -Answer and Explanation: The correct option is (c) Each firm chooses the price it wants to sell. Since there are large number of sellers in the market, any change in supply by the sellers can not influence the market price.