Which One Of The Following Statements Is Incorrect? Under Perfect Competition

Perfect Competition

Perfect competition is a theoretical market structure in which there are a large number of buyers and sellers, each with a negligible market share. This means that no single buyer or seller has the power to influence the market price. Perfect competition is often used as a benchmark against which other market structures are compared.

In perfect competition, the following conditions must be met:

• There must be a large number of buyers and sellers.
• Each buyer and seller must have a negligible market share.
• The product must be homogeneous (i.e., identical).
• Buyers and sellers must have perfect information about the market.

Incorrect Statement

One of the following statements is incorrect about perfect competition. Which one is it?

• In perfect competition, the equilibrium price is the price at which the quantity supplied equals the quantity demanded.
• In perfect competition, firms are price takers.
• In perfect competition, firms have no market power.
• In perfect competition, there is no product differentiation.
• In perfect competition, there is perfect information.

The incorrect statement is: In perfect competition, firms have market power.

In perfect competition, firms have no market power because they are price takers. This means that they must accept the market price and cannot influence it. Therefore, firms in perfect competition have no power to control the quantity supplied or the price of the product.

Conclusion

Perfect competition is a theoretical market structure that is characterized by a large number of buyers and sellers, each with a negligible market share. In perfect competition, firms are price takers and have no market power. The equilibrium price in perfect competition is the price at which the quantity supplied equals the quantity demanded.

Which One Of The Following Statements Is Incorrect? Under Perfect Competition