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. Homogeneous 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.
1. Which of the following does not support the argument of perfectly competitive firm being a price taker?
(a) Large number of firms
(b) Sale of homogeneous products
(c) Price discrimination
(d) Price fixation by the industry
2. degree of product differentiation is found under perfect competition.
(a) Zero
(b) One
(c) Infinite
(d) None of these
3. Under perfect competition, demand curve of a firm is:
(a) perfectly elastic
(b) perfectly inelastic
(c) more elastic
(d) less elastic
4. A firm under perfect competition earns only normal profits in the short run. (True or False)
5. Read the following statements carefully and choose the correct alternative among those given below:
Statement 1: Perfectly competitive firms exercise partial control over price.
Statement 2: Product differentiation is widely practiced under perfect competition.
(a) Both the statements are true
(b) Both the statements are false
(c) Statement 1 is true and Statement 2 is false
(d) Statement 2 is true and Statement 1 is false
6. What is the shape of average revenue curve under perfect competition?
