Question

. A perfectly competitive industry exists under which of the following conditions? I. The product sold is similar across firms. II. There are many sellers, each small relative to the total market. III. There are many sellers, each with total assets less than $2 million. IV. The threat of competition exists from potential sellers that have not yet entered the market. a) I and II only I b) III, and IV only c) I, II, and III only d) I, II, and IV only

Answer 1

I, II, and IV only

Step-by-step explanation:

A perfectly competitive industry is an industry in which all firms sell an homogeneous product, all firms are price takers, buyers have complete about the product being sold and the prices charged by each firm.

Moreover, Firms can enter or exit the market without cost.

A perfectly competitive industry exists if the product sold is similar across firms, there are many sellers, each small relative to the total market and the threat of competition exists from potential sellers that have not yet entered the market.

So, answer is option d) I, II, and IV only

Answer 2

a) I and II only

Step-by-step explanation:

Perfect Competition is a market form : which has large number of buyers & sellers, selling homogeneous products at constant prices. Large number of buyers & sellers imply that they have insignificant share of & control over market price & quantity. The market has free entry & exit, so they earn only normal profits in long run. Also, all the buyers & sellers have full information about market. The similarity level of entire market implies there are no selling costs.

The above entire description of perfect competition, its highlighted (underlined) parts : signify that - 'The product sold is similar across firms' & 'There are many sellers, each small relative to the total market' are correct perfect competition conditions.