Question

Which of the following statements are correct regarding firms in perfect competition?
• [(A)] No single buyer or seller can influence the market price.
• [(B)] Products sold by different firms are differentiated to attract customers.
• [(C)] There are no barriers to entry or exit in the long run.
• [(D)] Firms in a perfectly competitive market always make super-normal profit in the long run. Choose the correct answer:

• A. (A) and (C) only
• B. (A), (B), and (D) only
• C. (B), (C), and (D) only
• D. (A), (B), (C), and (D)

Hint:

Features of perfect competition: \[ \mathrm{Homogeneous\ Product} \] \[ \mathrm{Free\ Entry\ and\ Exit} \] \[ \mathrm{Price\ Taking\ Firms} \]

Answer 1

The Correct Option is A

Step 1: Analyze statement (A).
In perfect competition: \[ \mathrm{No\ individual\ buyer\ or\ seller\ can\ influence\ market\ price} \] Firms are: \[ \mathrm{Price\ Takers} \] Hence: \[ \Rightarrow \mathrm{Correct} \]

Step 2: Analyze statement (B).
In perfect competition: \[ \mathrm{Products\ are\ homogeneous} \] There is no product differentiation. \[ \Rightarrow \mathrm{Incorrect} \]

Step 3: Analyze statement (C).
Perfect competition assumes: \[ \mathrm{Free\ Entry\ and\ Exit} \] Thus: \[ \Rightarrow \mathrm{Correct} \]

Step 4: Analyze statement (D).
In long run equilibrium: \[ P=ATC \] Firms earn only: \[ \mathrm{Normal\ Profit} \] not super-normal profit. \[ \Rightarrow \mathrm{Incorrect} \]

Step 5: Identify correct combination.
Correct statements are: \[ (A)\ \text{and}\ (C) \] Hence, the correct answer is: \[ \boxed{\mathrm{(A)}} \]