Question:
Which of the following are characteristics of a perfectly competitive market?
A. There is perfect information in the market.
B. The market price is determined by the collective interaction of supply and demand.
C. Each firm has significant market power to influence prices.
D. Firms in a perfectly competitive market earn normal profit in the long run.
Choose the correct answer:
Which of the following are characteristics of a perfectly competitive market?
A. There is perfect information in the market.
B. The market price is determined by the collective interaction of supply and demand.
C. Each firm has significant market power to influence prices.
D. Firms in a perfectly competitive market earn normal profit in the long run.
Choose the correct answer:
B. The market price is determined by the collective interaction of supply and demand.
C. Each firm has significant market power to influence prices.
D. Firms in a perfectly competitive market earn normal profit in the long run.
Choose the correct answer:
Show Hint
In perfect competition, firms are price takers and earn normal profit in the long run.
Updated On: May 12, 2026
- A, B, and D only
- B, C, and D only
- A, C, and D only
- A, B, C, and D
Show Solution
Verified By Collegedunia
The Correct Option is A
Solution and Explanation
Concept:
A perfectly competitive market has many buyers and sellers, homogeneous products, perfect information, free entry and exit, and no individual firm has control over price. Each firm is a price taker.
Step 1: Check statement A.
Perfect competition assumes perfect information among buyers and sellers. So: \[ A = \text{Correct} \]
Step 2: Check statement B.
In perfect competition, market price is determined by the interaction of total demand and total supply. Individual firms accept this price. So: \[ B = \text{Correct} \]
Step 3: Check statement C.
In perfect competition, no single firm has market power. Each firm is a price taker, not a price maker. So: \[ C = \text{Incorrect} \]
Step 4: Check statement D.
In the long run, free entry and exit ensure that firms earn only normal profit. If firms earn abnormal profit, new firms enter. If firms suffer losses, some firms leave. Finally, only normal profit remains. So: \[ D = \text{Correct} \]
Step 5: Final conclusion.
The correct statements are: \[ A,\ B,\ D \] Hence: \[ \boxed{\text{(A) A, B, and D only}} \]
A perfectly competitive market has many buyers and sellers, homogeneous products, perfect information, free entry and exit, and no individual firm has control over price. Each firm is a price taker.
Step 1: Check statement A.
Perfect competition assumes perfect information among buyers and sellers. So: \[ A = \text{Correct} \]
Step 2: Check statement B.
In perfect competition, market price is determined by the interaction of total demand and total supply. Individual firms accept this price. So: \[ B = \text{Correct} \]
Step 3: Check statement C.
In perfect competition, no single firm has market power. Each firm is a price taker, not a price maker. So: \[ C = \text{Incorrect} \]
Step 4: Check statement D.
In the long run, free entry and exit ensure that firms earn only normal profit. If firms earn abnormal profit, new firms enter. If firms suffer losses, some firms leave. Finally, only normal profit remains. So: \[ D = \text{Correct} \]
Step 5: Final conclusion.
The correct statements are: \[ A,\ B,\ D \] Hence: \[ \boxed{\text{(A) A, B, and D only}} \]
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