Question
Explain any two main features of perfect competition.
✓
Answer
Main features of perfect competition:
- Large number of buyers and sellers. The share of a single seller in total output is insignificant, so he has no influence over price of the product. Similarly a single buyer has no influence over price.
- The product is homogeneous. The products produced by different producers are taken to be homogeneous by buyers, so no producer is able to charge a different price for his produce.
- There is freedom of entry and exit of firms. As a result of this no firm will earn abnormal profits or incur losses in the long run.
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