ECONOMICS
MARKET FAILURES
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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barrier to entry
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produce homogenous product
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price maker
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one seller in the whole industry
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Detailed explanation-1: -In perfect competition, entities are characterized by the sale of identical products, also known as homogeneous goods. Further, the selling of homogeneous products in a perfectly competitive market makes information concerning a product evenly distributed between sellers and buyers in a market.
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.
Detailed explanation-3: -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-4: -A homogeneous product is one with no unique physical characteristics or perceived attributes (or very few).
Detailed explanation-5: -Answer and Explanation: 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.