As per the NCERT glossary, perfect competition is a market environment wherein:
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → (i) all firms in the market produce the same good and (ii) buyers and sellers are price-takers
In perfect competition, every firm sells the same good, and both buyers and sellers take the market price as given.
Option (1) (i) each firm produces a slightly different good and (ii) each firm sets its own price — Incorrect. In perfect competition the product is homogenous, and no firm can set its own price.
Option (2) (i) all firms in the market produce the same good and (ii) only the sellers are price-takers — Incorrect. Buyers are price-takers too. A buyer who asks for a price below the market price gets no seller.
Option (3) (i) all firms in the market produce the same good and (ii) buyers and sellers are price-takers — Correct. Both parts match the Glossary meaning.
Option (4) (i) each firm produces a slightly different good and (ii) buyers and sellers are price-takers — Incorrect. The first part is wrong: firms produce the same good.
NCERT (2026-27): Glossary: “Perfect competition – A market environment wherein (i) all firms in the market produce the same good and (ii) buyers and sellers are price-takers.” “4.1 Perfect Competition: Defining Features … However, a price-taking buyer believes that if she asks for a price below the market price, no firm will be willing to sell to her. On the other hand, should the price asked be greater than or equal to the market price, the buyer can obtain as many units of the good as she desires to buy.” |