Question

In case of perfect competition, products of all firms in the industry are ________.

• A. close substitutes of each other
• B. close substitutes supported with advertisement
• C. differentiated products supported with advertisement
• D. perfect substitutes of each other

Answer 1

The correct option is D perfect substitutes of each other

In case of perfect competition, products of all firms in the industry are perfect substitutes of each other, that means the goods of the perfectly competitive market are identical.Perfect competition is a form of the market in which there is a large number of buyers and sellers and where homogeneous product is sold at a uniform price.Firm's demand curve under perfect competition is a horizontal straight line parallel to X-axis.Under perfect competition, AR is constant for a firm. Hence, AR = MR.