Now, before you start answering the questions below let’s do a quick revision of this concept. Perfect competition is a hypothetical market where there are a large number of buyers and sellers selling homogeneous products. This indicates that all the products are perfect substitutes for each other. Show
All the sellers sell the product at a uniform price. There is no monopoly and the sellers are price takers. This means that the sellers don’t have the power to influence the prices of the products available in the market. Even if a seller raises the price of their products even by a single rupee all the customers will rush to buy products from its competitors. This is because the products available in the market are homogeneous in nature and there are a lot of sellers. Similarly, buyers cannot influence the price of the products by influencing the demand. The prices of the products are decided by the forces of demand and supply. There is free entry and exit for all the firms. Both the buyers and sellers have all the knowledge about the product. Since the buyers already know everything about the product there is a need for advertising. All the factors of production i.e. labour, raw material and capital have total mobility. This means these factors of production can move from one place to another without any restrictions. It is assumed that in a perfectly competitive market all sellers are equally near or farther away from the market. This means that there is no cost for transporting goods and services. Due to this the overall production cost and selling price are the same everywhere. There is no intervention of the government in the perfect competition market. Government cannot change the supply or prices of the products. MCQs:
Answer: A 2. Which of the following options is not the characteristics of the perfect competition market.
Answer: D 3. Which option shows the distinguishing feature between perfect and monopolistic competition?
Answer: A 4. Sellers selling homogeneous products in the perfect competition market indicate?
Answer: D 5. Which of the following options creates a barrier to entry for new firms?
Answer: A 6. Which of the following statements is true in the case of a perfect competition market?
Answer: C 7. Which of the following markets have a few numbers of firms.
Answer: D 8. Statement (1): Perfect competition hypothetical situation. Statement (2): Under perfect competition, the government decides the prices of all the products and services.
Answer: A 9. The elasticity of demand for the product in a single firm in the perfect competition is
Answer: C 10. What is the unique feature of perfect competition concerning factors of production.
Answer: A 11. In perfect competition how the prices of goods and services are decided?
Answer: A 12. Business owners in the perfect competition have to make different types of decisions, both short and long term. Which of the following options are short term decisions?
Answer: A 13. Sellers in perfect competition are:
Answer: B 14. Which of the following statements is true if the seller’s product is facing perfectly elastic demand?
Answer: D 15. Sellers in the perfect competition are price takers because:
Answer: A 16. What will happen will the sellers increase the prices of their products:
Answer: B 17. How is the demand curve in a perfectly competitive market?
Answer: A 18. How can perfect competition maximize profit?
Answer: A 19. What industry is closest to perfect competition?
Answer: A 20. Why is perfect competition unrealistic?
Answer: D 21. Why is there no need for sellers to spend money on advertising?
Answer: A 22. Firms in a perfectly competitive market can only make profits or losses in the short run because:
Answer: C 23. Which of the following statements about perfect competition are true?
Answer: A Which of the following is true if the demand for a sellers product is perfectly elastic?If demand for a seller's product is perfectly elastic, which of the following is true? i. The firm will sell no output if it sets the price its product above the market price.
Which of the following is true regarding the number of sellers and buyers in a perfect competition?The fundamental condition of perfect competition is that there must be a large number of sellers or firms. Homogeneous Commodity is the second fundamental condition of a perfect market. The products of all firms in the industry are homogeneous and identical. Was this answer helpful?
Which of the following is the best example of a good sold in a highly perfectly competitive market?In a perfectly competitive market, many firms sell identical products. So, Answer (c.) barley is the best example of a good produced and sold in a perfectly competitive market. The automobile and computer industries could be classified as oligopoly industries, in which a few sellers sell similar or identical products.
Which of the following is true for a perfectly competitive firm in the market above?The correct answer is b. The firm cannot affect the market price for its good. In a perfectly competitive market, a single firm cannot influence the market price.
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