ECONOMICS
COMPETITION AND MARKET STRUCTURES
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Only a few buyers and sellers
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1. Many buyers and sellers2. Identical products3. Informed buyers and sellers4. Free market entry and exit
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Either A or B
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None of the above
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Detailed explanation-1: -Perfect competition occurs when there are many sellers, there is easy entry and exiting of firms, products are identical from one seller to another, and sellers are price takers.
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: -Although such high entry and exit costs are standard in many markets, in perfectly competitive markets firms do not face costs to either enter or exit a market. Perfectly competitive firms are free to enter an industry if there is a potential for profit, or to exit the industry in the event of losses.
Detailed explanation-4: -There are many buyers and sellers. Sellers offer identical products. Buyers and sellers are well-informed about their products. Sellers are able to enter and exit the market freely.
Detailed explanation-5: -There are a large number of firms in the market. Firms in the market sell an identical product. Firms are price takers. Each firm has a small share of the total market (no monopolies) Buyers have complete information about the product. There are no barriers for firms to enter and exit the market.