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Target Exam

CUET

Subject

Economics

Chapter

Micro Economics: Theory of Firms under Perfect Competition

Question:

Which of the following is not the feature of perfect competition?

Options:

Information is perfect.

The product of one firm may or may not be differentiated from the product of any other firm.

No individual buyer or seller can influence the market by their size.

Entry into the market as well as exit from the market are free for firms.

Correct Answer:

The product of one firm may or may not be differentiated from the product of any other firm.

Explanation:

The correct answer is Option 2: The product of one firm may or may not be differentiated from the product of any other firm.

In a perfectly competitive market, all firms produce homogeneous (identical) products. This means that:

  • No differentiation exists between the products of different firms.
  • Consumers see no difference between the goods offered by different sellers.
  • If products were differentiated, it would imply monopolistic competition, not perfect competition.

Since the statement "The product of one firm may or may not be differentiated" contradicts the assumption of homogeneous products, it is not a feature of perfect competition.

Perfect Competition Characteristics:

Perfect information

Large number of buyers and sellers (no individual influence)

Free entry and exit

Homogeneous products

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