Assertion (A): Free entry and exit is essential for the large number of firms in a perfectly competitive market to exist.
Reason (R): If entry into the market were difficult or restricted, the number of firms in the market could be small.
Answer & explanation
Correct answer: option 1
The correct answer is Option (1) → Both (A) and (R) are true and (R) is the correct explanation of (A).
Assertion (A): Free entry and exit is essential for the large number of firms in a perfectly competitive market to exist. — True. Free entry means new firms can easily join the market.
Reason (R): If entry into the market were difficult or restricted, the number of firms in the market could be small. — True. Barriers to entry keep new firms out.
Why R explains A?
R shows what happens without free entry: the number of firms could stay small. So free entry is what allows a large number of firms to exist, which is A.
NCERT (2026-27): “4.1 Perfect Competition: Defining Features … Free entry and exit mean that it is easy for firms to enter the market, as well as to leave it. This condition is essential for the large numbers of firms to exist. If entry was difficult, or restricted, then the number of firms in the market could be small. …” |