Multiple Choice
Which of the following characteristics does NOT describe a perfectly competitive market?
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11. Perfect Competition
Characteristics of Perfect Competition
Multiple Choice
Which of the following firms is the closest to being a perfectly competitive firm?
A
A national airline company
B
A wheat farmer in a large agricultural region
C
A local electricity provider
D
A smartphone manufacturer
Verified step by step guidance1
Step 1: Understand the characteristics of a perfectly competitive firm. Such a firm operates in a market with many buyers and sellers, sells a homogeneous product, has no control over the market price (price taker), and faces free entry and exit in the market.
Step 2: Analyze each option in terms of these characteristics. For example, a national airline company typically has few competitors, differentiated services, and some control over pricing, so it is not perfectly competitive.
Step 3: Consider the wheat farmer in a large agricultural region. This farmer sells a homogeneous product (wheat), faces many competitors, and is a price taker because no single farmer can influence the market price. Entry and exit are relatively free in agriculture.
Step 4: Evaluate the local electricity provider, which usually operates as a monopoly or regulated firm with significant control over price and no close substitutes, so it is not perfectly competitive.
Step 5: Assess the smartphone manufacturer, which sells differentiated products, has market power, and faces competition but not perfect competition. Therefore, the wheat farmer is closest to being a perfectly competitive firm.
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