Q104
Which of the following is NOT a characteristic of perfect competition?
A.
Free entry and exit of the firms
B.
The demand curve of firm is horizontal
C.
The marginal revenue curve is horizontal
D.
An individual firm can influence the price
AnswerAnswer: Option D
Solution
Answer: Option D
Solution:
An individual firm can influence the price is not a characteristic of perfect competition. All goods in a perfectly competitive market are considered perfect substitutes, and the demand curve is perfectly elastic for each of the small, individual firms that participate in the market. These firms are price takers–if one firm tries to raise its price, there would be no demand for that firm's product.