Question

1 what oesit takes to have a prefelcty competitive economic sitution ? explain briefly

Answer 1

ANSWER:

The following points are required to have a perfectly competitive economic situation:

1. Free entry and exit of firms.

2. No government intervention.

3. No transportation cost.

4. Every firm earns normal profits.

5. No firm can influence the price of the product.

6. All the factors of production that is labor ,capital are not hindered by any market force.

7. Consumers are rational and have perfect knowledge of the market.

8. There are large number of buyers and sellers.

9. Same product is made by each and every firm.

10. The advertising costs are zero.