Final answer:
In a perfectly competitive market, a small firm is one that has a relatively smaller market share than its competitors. The UK government helps small and medium enterprises through financial support, tax incentives, and business support services.
Step-by-step explanation:
In a perfectly competitive market, a small firm refers to a company that has a relatively small market share compared to the rest of the market. It means that the firm's production and sales volume are much smaller in comparison to other competitors in the industry.
However, the term 'small' is relative and can vary depending on the specific industry and market. For example, a small firm in the global automobile industry may still be a large company in terms of revenue and market share compared to a small firm in the local bakery industry.
Regarding how the UK government supports small and medium enterprises (SMEs), the government provides various forms of assistance such as financial support, tax incentives, and access to business support services. These measures aim to encourage the growth and development of SMEs, stimulate innovation, and create job opportunities.