Question

Under perfect competition, there can be only one price in the market because ___________________.

• A. The product sold by all firms is homogeneous
• B. The product sold by all firms is hetrogeneous
• C. The firm has no control over its price fixation
• D. None of the above

Answer 1

Answer: (A)

The product sold by all firms is homogeneous

A perfectly competitive firm is known as a price taker because the pressure of competing firms forces them to accept the prevailing equilibrium price in the market.The market price is determined solely by supply and demand in the entire market and not by the individual farmer. Here, all the firms sell homogeneous product so no firm is in a position to change the price.