ECONOMICS
COMPETITION AND MARKET STRUCTURES
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Price differences between firms producing the same product
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The industry’s demand curve is perfectly elastic
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Significant barriers to entry into the industry
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Products are standardized or homogeneous
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Detailed explanation-1: -In a perfectly competitive market, commodity is homogeneous (identical). Thus, the buyers find no reason to prefer the product of one seller to the product of another. Hence the firms are price takers.
Detailed explanation-2: -The three primary characteristics of perfect competition are (1) no company holds a substantial market share, (2) the industry output is standardized, and (3) there is freedom of entry and exit. The efficient market equilibrium in a perfect competition is where marginal revenue equals marginal cost.
Detailed explanation-3: -In a perfectly competitive market, products are standardized, and there is no difference between one seller’s product and another seller’s product. Therefore, if a seller tries to raise a price above the d. market equilibrium price, then consumers simply switch and buy the product from another firm.
Detailed explanation-4: -The correct answer is option c. Firms can exit and enter the market freely. A perfectly competitive market is a theoretical market where firms can enter and exit the market freely or without cost. Due to this, the market structure has a large pool of sellers or firms competing to sell identical goods and services.
Detailed explanation-5: -One of the main features of perfect competition is that all producers contribute significantly to the market. The products are homogenous, and the producers enter and exit the market freely. There are no additional transaction costs. More items