Question

What is the key characteristic that leads to zero profit in perfect competition

What is the key characteristic that leads to zero profit in perfect competition

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Answer #1

In a perfect competition large number of buyers and sellers and goods are homogeneous,also in this market consumer has a perfect knowledge of the market also in this market price of good remains same because goods are homogeneous and that's why this market is also know as price taker market. Perfect competition has another characteristic I.e freedom of entry and exit of a firm in another terms No barriers to entry and exit and this characteristic insure that in the perfect competition market no profit and no loss.

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