Question

Which of the following is not a characteristic of a firm operating in a perfectly competitive market?

A. Each firm sells a virtually identical product.

B. Each firm is a price taker.

C. Each firm chooses an output level that maximizes its profits.

D. Blocked entry.

Answer 1

One of the feature of a perfect competitive firm is that there are large number of sellers selling identical(or homogeneous) goods. Thus this is also a feature of a perfect competitive firm. Thus this option (A) is incorrect

In a perfect competitive market each firm charges price determined by a market and thus each firm is a price taker. Thus option (B) is also incorrect. .Every firm in every market aims to maximize profit and thus chooses that quantity which maximizes their profit. This goes for perfect competitive firm as well. Thus option (C) is incorrect.

In a perfect competitive market there are free entry and exit as there are no barriers to entry because items sold are identical and also there are no legal barriers. So, Blocked entry is not a feature of perfect competitive industry. Thus, Option (D) is the correct answer.

Hence, the correct answer is (D) Blocked entry.