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The Theory Of The Firm Under Perfect Competition
Question
What is perfect competition?
Solution
Meaning. Perfect competition is a market situation in which there are a large number of buyers and sellers, firms sell a homogeneous product and there is free entry and exit. Product sells at a uniform price in the whole market (industry). No individual firm can influence the market price by its independent action because a firm is the only 'price-taker' and industry is the 'price-maker'. It implies no rivalry among firms. The firm, at this given price, can only decide how much quantity of the product to sell. As a result, demand (or AR) curve facing an individual firm is horizontal straight line parallel to X-axis as shown in Fig. 4.1. Perfect competitive market can be defined better in terms of its characteristics which are as under.
Some More Questions From The Theory Of The Firm Under Perfect Competition Chapter
Define homogeneous product.
What is meant by differentiated product?
Define perfect competition.
Is the seller under perfect competition a price maker or a price taker?
Define monopoly.
Define market equilibrium.
Can a seller under monopolistic competition influence the price?
Why under imperfect competition, MR is less than price?
Why is demand for a good under monopoly less elastic than in monopolistic competition?
What is meant by the term equilibrium?
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Mock Test Series
Mock Test Series