Notes  >  Chapter 9 : Price Determination under Perfect Competition - Questions

Chapter 9 : Price Determination under Perfect Competition - Questions PDF Download

Download, print and study this document offline

FAQs on Chapter 9 : Price Determination under Perfect Competition - Questions

1. What is perfect competition?
Ans. Perfect competition is a market structure in which there are a large number of buyers and sellers, and all firms produce identical products. In this type of market, there are no barriers to entry or exit, and all firms have perfect knowledge of prices and market conditions.
2. How is price determined under perfect competition?
Ans. Price is determined by the interaction of supply and demand in a perfectly competitive market. In the long run, under perfect competition, firms will produce at the point where their marginal cost equals the market price. This equilibrium price is established through the free movement of buyers and sellers.
3. What are the characteristics of a perfectly competitive market?
Ans. The characteristics of a perfectly competitive market include a large number of buyers and sellers, homogeneous products, perfect knowledge, free entry and exit, and price-taking behavior by individual firms. These characteristics ensure that no single buyer or seller has the power to influence the market price.
4. How does perfect competition benefit consumers?
Ans. Perfect competition benefits consumers by ensuring that firms produce goods and services at the lowest possible cost. In a perfectly competitive market, firms are forced to be efficient and innovative in order to stay competitive. This leads to lower prices, a wide variety of choices, and high-quality products for consumers.
5. Can perfect competition exist in the real world?
Ans. While perfect competition is an idealized market structure, it is rarely found in the real world. However, certain industries, such as agriculture and stock trading, exhibit some characteristics of perfect competition. In most cases, markets tend to have varying degrees of competition, with some level of market power held by certain firms.
Download as PDF
Explore Courses for exam
Signup for Free!
Signup to see your scores go up within 7 days! Learn & Practice with 1000+ FREE Notes, Videos & Tests.
10M+ students study on EduRev