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.

Answer 1

Answer:

I, II, and IV only

Explanation:

• A perfect competition is defined by an idealizing market and shows that the market will reach equilibrium.

• The prevalence of the perfect competition needs a larger number of buyers and sellers, well defined property rights and homogenous products, profits maximization, rational buyers and no barriers to entry and exit.  

• An example of the agricultural markets as perfect competition, as there are numerous farmers that sell the same vegetables and fruits and have same prices. Another example is that of the foreign exchange markets was the trader's exchange currencies and sell identical goods.