Each firm in a perfectly competitive industry A. produces a good that is identical to that...

Each firm in a perfectly competitive industry

produces a good that is identical to that of the other firms.

has control over at least one unique resource to separate themselves from their competitors.

attains economies of scale so that its efficient size is large compared to the market as a whole.

produces a good that is slightly different from that of the other firms.

has an important influence on the market price of the good or service being produced.

Solutions

Expert Solution

Firm in a Perfectly Competitive Industry
Each firm in a perfectly competitive industry produces a good that is identical to that of the other firms.
Perfect competition is the market with large number of buyers and sellers with competition at the maximum level. Firms produce identical or perfect substitutes creating large competition in the market. No firms can influence the price in the market. Availability of perfect substitutes or identical products will not force the firms to increase the price which will leads to fall in the demand of the firm’s product. Perfect competition will charge the possible lower price increasing the competition in the market.
No individual firms have control or power over resources in perfect competition since the resources are perfectly mobile and not under monopoly.
Attaining economies of scale may increase the productivity or returns to the firms but can have only a share of the market which is not that large since the number of sellers in the market is high and the price is almost the same because of the competition.
Producing goods that are slightly differentiated constitutes to monopolistic competition or oligopoly but not in perfect competition.
Perfect competitive firms do not have any influence on determining or fixing the price in the market since the firms are price takers.

Rahul Sunny answered 1 year ago

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