Under perfect competition

Question

Quizplus · Accepted Answer

In perfect competition, there are numerous buyers and sellers, and all the products are homogeneous. This makes the demand curve perfectly elastic, and this elasticity makes the marginal revenue curve identical to the demand curve. Hence, the correct answer is C.

Option A is incorrect because accounting profits may exist in the short run, but in the long run, firms will enter the market due to high profits, driving down prices and reducing profits to zero.

Option B is incorrect because under perfect competition, all buyers and sellers have perfect knowledge about the market, including prices and economic opportunities.

Option D is also incorrect because the firm has no control over the market price because it is a price-taker. The market forces of demand and supply determine the price, and the individual firm has to accept it.

Under Perfect Competition