In an environment characterized by perfect competition,we expect that ________.
A)there are very few firms in the economy
B)there are many firms in the economy but a very few have the lion's share of the industry
C)the are many small firms in the economy and every single firm is a price taker
D)the government sets prices for all firms
E)none of the above

Question

Quizplus · Accepted Answer

In a perfectly competitive environment, there are many small firms in the economy, and every single firm is a price taker. This means that no single firm has the power to influence the market price of the product. As a result, all firms face a horizontal demand curve and must accept the market price. This condition leads to price competition, and firms are forced to produce at the lowest possible cost to remain in business. Therefore, choice C is the best option.

In an Environment Characterized by Perfect Competition,we Expect That ________