Answer: Option D
Explanation:
A. In a perfectly competitive market the number of firms is so large that no individual firm can affect the price. Thus, A is correct.
B. All firms in a perfect competition sells same product without any differentiation thus no firm can charge extra price. Thus, B is correct.
C. There are no barriers to entry and exit in the market therefore no firm can earn abnormal profits in long run. Thus, C is correct.
Hence all the options given are characteristics of perfect competition.
Answer: Option (D) is correct.
Explanation:
Correct Option: All of the above.
In a perfectly competitive market, there are large number of buyers and sellers in a market. Single buyer and single seller won't be able to affect the price of the market.
All the firms in this market scenario selling a standardized product.
Price of the product will be determined by the market forces. In this market, individual firms are generally facing a horizontal demand curve where price is equal to the marginal revenue. Because demand curve is parallel to x-axis and it is perfectly elastic, so there will be no changes in prices if there is a change in a demand.
Profit maximizing condition for the competitive firms is a point where price is equal to the marginal cost.
