Question

1) Discuss the characteristics of a perfect competitive industry and which real-life industries come closest to this type of market structure.

Answer 1

The characteristic of a perfect competitive industry are listed as follows:
1. Large number of buyers and sellers
2. Easy entry and exit for firms
3. Identical good
4. Transparent and perfect knowledge of the market
5. No control over price
6. Demand curve is horizontal to x-axis
Example includes firms selling agriculture commodities like wheat, corn, potatoes, tomatoes, rice. So here there would be more number of firms selling these commodities for which the entry and exit is easy, the good will be of identical in nature and no single firm has control over price.