In a market of identical firms, the firms are called ‘identical’ because they all have the same:
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → cost structure
Firms are called identical when they have the same cost structure: the same costs at every level of output. So all of them behave alike, and at a given price each supplies the same amount.
NCERT (2026-27): “5.1.2 Market Equilibrium: Free Entry and Exit In the last section, the market equilibrium was studied under the assumption that there is a fixed number of firms. In this section, we will study market equilibrium when firms can enter and exit the market freely. Here, for simplicity, we assume that all the firms in the market are identical. … This assumption implies that in equilibrium no firm earns supernormal profit or incurs loss by remaining in production; in other words, the equilibrium price will be equal to the minimum average cost of the firms.” “Example 5.1 Let us consider the example of a market consisting of identical1 farms producing same quality of wheat. Suppose the market demand curve and the market supply curve for wheat are given by:” Footnote 1: “Here, by identical we mean that all farms have same cost structure.” |