Question

In a perfectly competitive market, the price of the product is

a. independently set by each competing firm.
b. set by market supply and demand.
c. jointly set after a meeting of all firms in the market.
d. set by the market leader and then copied by other firms.

Answer 1

b. set by market supply and demand.

Step-by-step explanation:

A perfect competition is characterised by many buyers and sellers of homogenous goods and services. Because goods are homogenous and there are many buyers in the industry, sellers do not set the price for their goods and services. Prices are set by the market forces of demand and supply. This makes sellers price takers.

Other features of perfect competition are :

1. No barriers to entry or exit of firms

2. Firms make zero economic profit in the long run.

I hope my answer helps you.