In the context of perfect competition, which one of the following is not correct?
Answer & explanation
Correct answer: option 1
The correct answer is Option (1) → Firm has full control over price.
In a perfect competition market:
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Firms are price takers, not price makers. They have no control over the price; the market determines the price.
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The demand curve faced by a firm is a horizontal straight line, indicating perfectly elastic demand.
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There is freedom of entry and exit for firms.
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Selling costs (like advertising) do not exist, because all firms sell identical products.
Thus, the statement "Firm has full control over price" is not correct under perfect competition.