Question

All of the following are characteristics of firms in a perfectly competitive industry except:

A. they face a perfectly elastic demand curve.
B. they are price makers.
C. there is easy entry and exit.
D. they produce identical products

Answer 1

The correct answer is option B.

Step-by-step explanation:

A perfectly competitive market is a market structure where there is a large number of firms. These firms produce identical or homogenous products. There are relatively easy entry and exit in the firm.

The firms are price takers and face a perfectly elastic or horizontal line demand curve. Firms in all other market structures are price makers.

These firms can earn only normal profits in the long run because of easy entry and exit.