CA Foundation Exam  >  CA Foundation Questions  >  Which of the following is not a characteristi... Start Learning for Free
Which of the following is not a characteristic of a perfectly competitive market?
  • a)
    Large number of firms in the industry.
  • b)
    Outputs of the firms are perfect substitutes for one another.
  • c)
    Firms face downward-sloping demand curves.
  • d)
    Resources are very mobile.
Correct answer is option 'C'. Can you explain this answer?
Most Upvoted Answer
Which of the following is not a characteristic of a perfectly competit...
Characteristics of a perfectly competitive market:
1. Large number of firms in the industry: In a perfectly competitive market, there are numerous firms operating in the industry. Each firm is small relative to the overall market and has no significant market power. This ensures that no single firm can influence the market price.
2. Outputs of the firms are perfect substitutes for one another: In a perfectly competitive market, the products offered by different firms are homogeneous or identical. Consumers perceive no differences between the products and are willing to switch between different sellers based solely on price.
3. Firms face downward-sloping demand curves: This characteristic is not present in a perfectly competitive market. In fact, firms operating in a perfectly competitive market are price takers, meaning they have no control over the market price and must accept the prevailing price determined by the forces of supply and demand.
4. Resources are very mobile: In a perfectly competitive market, resources such as labor, capital, and raw materials can easily move between firms and industries. There are no barriers to entry or exit, allowing resources to flow freely to where they are most productive. This mobility ensures efficiency in resource allocation.
5. Perfect knowledge and information: In a perfectly competitive market, buyers and sellers have access to complete and accurate information about prices, quantities, and market conditions. This allows them to make informed decisions and ensures transparency in the market.

Explanation of the correct answer:
The correct answer is option C, "Firms face downward-sloping demand curves." In a perfectly competitive market, firms are price takers and have no control over the market price. They must accept the prevailing price determined by the market forces of supply and demand. As a result, the demand curve facing each individual firm is perfectly elastic or horizontal, indicating that the firm can sell any quantity at the market price without affecting the market price. This is in contrast to other market structures, such as monopolistic competition or oligopoly, where firms face downward-sloping demand curves and have some degree of control over the market price.

In a perfectly competitive market, the presence of a large number of firms, homogeneous products, resource mobility, and perfect knowledge ensures that the market operates efficiently and maximizes consumer welfare. The absence of market power allows for fair competition and prevents any single firm from exploiting consumers or manipulating prices.
Explore Courses for CA Foundation exam
Which of the following is not a characteristic of a perfectly competitive market?a)Large number of firms in the industry.b)Outputs of the firms are perfect substitutes for one another.c)Firms face downward-sloping demand curves.d)Resources are very mobile.Correct answer is option 'C'. Can you explain this answer?
Question Description
Which of the following is not a characteristic of a perfectly competitive market?a)Large number of firms in the industry.b)Outputs of the firms are perfect substitutes for one another.c)Firms face downward-sloping demand curves.d)Resources are very mobile.Correct answer is option 'C'. Can you explain this answer? for CA Foundation 2024 is part of CA Foundation preparation. The Question and answers have been prepared according to the CA Foundation exam syllabus. Information about Which of the following is not a characteristic of a perfectly competitive market?a)Large number of firms in the industry.b)Outputs of the firms are perfect substitutes for one another.c)Firms face downward-sloping demand curves.d)Resources are very mobile.Correct answer is option 'C'. Can you explain this answer? covers all topics & solutions for CA Foundation 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Which of the following is not a characteristic of a perfectly competitive market?a)Large number of firms in the industry.b)Outputs of the firms are perfect substitutes for one another.c)Firms face downward-sloping demand curves.d)Resources are very mobile.Correct answer is option 'C'. Can you explain this answer?.
Solutions for Which of the following is not a characteristic of a perfectly competitive market?a)Large number of firms in the industry.b)Outputs of the firms are perfect substitutes for one another.c)Firms face downward-sloping demand curves.d)Resources are very mobile.Correct answer is option 'C'. Can you explain this answer? in English & in Hindi are available as part of our courses for CA Foundation. Download more important topics, notes, lectures and mock test series for CA Foundation Exam by signing up for free.
Here you can find the meaning of Which of the following is not a characteristic of a perfectly competitive market?a)Large number of firms in the industry.b)Outputs of the firms are perfect substitutes for one another.c)Firms face downward-sloping demand curves.d)Resources are very mobile.Correct answer is option 'C'. Can you explain this answer? defined & explained in the simplest way possible. Besides giving the explanation of Which of the following is not a characteristic of a perfectly competitive market?a)Large number of firms in the industry.b)Outputs of the firms are perfect substitutes for one another.c)Firms face downward-sloping demand curves.d)Resources are very mobile.Correct answer is option 'C'. Can you explain this answer?, a detailed solution for Which of the following is not a characteristic of a perfectly competitive market?a)Large number of firms in the industry.b)Outputs of the firms are perfect substitutes for one another.c)Firms face downward-sloping demand curves.d)Resources are very mobile.Correct answer is option 'C'. Can you explain this answer? has been provided alongside types of Which of the following is not a characteristic of a perfectly competitive market?a)Large number of firms in the industry.b)Outputs of the firms are perfect substitutes for one another.c)Firms face downward-sloping demand curves.d)Resources are very mobile.Correct answer is option 'C'. Can you explain this answer? theory, EduRev gives you an ample number of questions to practice Which of the following is not a characteristic of a perfectly competitive market?a)Large number of firms in the industry.b)Outputs of the firms are perfect substitutes for one another.c)Firms face downward-sloping demand curves.d)Resources are very mobile.Correct answer is option 'C'. Can you explain this answer? tests, examples and also practice CA Foundation tests.
Explore Courses for CA Foundation exam

Top Courses for CA Foundation

Explore Courses
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