Question

One requirement for an industry to be perfectly competitive is that

A) sellers and buyers have imperfect information about prices.
B) established firms have no advantage over new firms.
C) established firms have a significant advantage over new firms.
D) different firms produce widely different products.
E) many firms produce slightly different products.

Answer 1

In perfect competition, many firms produce slightly different products.

Step-by-step explanation:

Firms are in perfect competition when the following conditions occur:

1. Many firms produce identical products.
2. Many buyers are available to buy the product, and many sellers are available to sell the product.
3. Sellers and buyers have all relevant information to make rational decisions about the product being bought and sold.
4. Firms can enter and leave the market without any restrictions, in other words, there is free entry and exit into and out of the market.

Based on these conditions, the requirement for an industry to be perfectly competitive is E) many firms produce slightly different products.