Final answer:
The statement is false; "ability" in the context of competition refers to a firm's capacity and resources for competitive moves, not just market knowledge. This capability is essential for long-term adaptation in a perfectly competitive market.
Step-by-step explanation:
The statement that "ability" refers to an attacking or responding firm's knowledge of the competitive market characteristics is false. In the context of competitive action and response, "ability" typically refers to the firm's capacity and resources to engage in competitive moves, rather than just knowledge about the market.
For instance, the characteristics of a perfectly competitive market include numerous buyers and sellers, homogenous products, and easy entry and exit from the market. Therefore, it is a firm's capability (including financial resources, production capacity, and human resources) that dictates their ability to compete rather than solely market knowledge.
In the long run, firms in a perfectly competitive market must be able to adapt to changing market conditions. This includes reacting to globalization and the advancement of communications and information technology, which can affect both the size and competitive strategies of the firms.