Question

What is one of the essential conditions of perfect competition?

• A. Product differentiation
• B. Multiplicity of prices for identical products at any one time
• C. Many sellers and a few buyers
• D. Only one price for identical goods at any time

Answer 1

Answer: (D)

Only one price for identical goods at any time

The fundamental condition of perfect competition is that there must be large number of sellers or firms. Homogeneous Commodity is the second fundamental condition of a perfect market. The products of all firms in the industry are homogeneous and identical. In other words, they are perfect substitutes for one another. there are no trademarks, patents etc to distinguish the product of one seller from that of another. Under perfect competition, the control over price is completely eliminated because all firms produce homogeneous commodities. This condition ensures that the same price prevails in the market for the same commodity.