Which of the following statements correctly give the meaning of a feature of perfect competition?
(A) Free entry and exit means that all buyers know the price charged by every firm.
(B) Homogeneous products mean that a buyer can choose any firm and still get the same product.
(C) Homogeneous products mean that firms can enter the market and leave it easily.
(D) Perfect information means that buyers and sellers are completely informed about the price and quality of the product.
(E) A large number of buyers and sellers means that no individual buyer or seller can influence the market by their size.
Which of the statements given above are correct?
Choose the correct answer from the options given below:
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → (B), (D) and (E) only
(A) Free entry and exit means that all buyers know the price charged by every firm. — Incorrect. Free entry and exit means firms can easily enter or leave the market. Knowing the price is perfect information.
(B) Homogeneous products mean that a buyer can choose any firm and still get the same product. — Correct. The product of each firm is identical.
(C) Homogeneous products mean that firms can enter the market and leave it easily. — Incorrect. Easy entry and exit is the meaning of free entry and exit, not of homogeneous products.
(D) Perfect information means that buyers and sellers are completely informed about the price and quality of the product. — Correct. They know the price, quality and other details.
(E) A large number of buyers and sellers means that no individual buyer or seller can influence the market by their size. — Correct. Each one is very small compared with the market.
NCERT (2026-27): “4.1 Perfect Competition: Defining Features … The existence of a large number of buyers and sellers means that each individual buyer and seller is very small compared to the size of the market. This means that no individual buyer or seller can influence the market by their size. Homogenous products further mean that the product of each firm is identical. So a buyer can choose to buy from any firm in the market, and she gets the same product. 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. Perfect information implies that all buyers and all sellers are completely informed about the price, quality and other relevant details about the product, as well as the market.” |