Consider the perfectly competititive market situaion. Which one of the following

Question

Consider the perfectly competititive market situaion. Which one of the following IS NOT a characteristic of the perfect competition? a. There are numerous producers and consumers and they are all well informed. b. There are small firms in an industry, and no one firm can control the price (Average Revenue, AR). Therefore any given firm is a "price taker" rather than a "price maker". c. Firms cannot enter into the industry freely, due to the barriers to entry, but they can easily exit the industry. d. in the long run a typical firm makes zero abnormal profit.

Explanation / Answer

Option (c).

In perfectly competitive market, entry and exit are both free and there are no barriers. This feature ensures that all firms make zero economic (abnormal) profit in long run (even though short run profit or loss is incurred by firms).

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