Q.Explain the meaning of Perfect Competition. Illustrate the mechanism of Price Determination under Perfect Competition.

Showing the 12 most recent of 48 on this concept.

1. CBSE 2026Set MARCH1 mark
   Q.Price taking behaviour is the distinguishing characteristic of __________ market.

   ›Reveal solutionSolution

   The blank is filled by Perfect Competition.

   Under perfect competition there are so many firms, each producing an identical (homogeneous) product, that no individual firm's output is large enough to affect the market price. Every firm therefore takes the price as given by the market and can only decide how much to produce at that price. This 'price-taking' behaviour is the key characteristic that distinguishes perfect compe …

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2. CBSE 2026Set ANNUAL1 mark
   Q.Fill in the blank: In the ________ market a firm can enter and exit freely.

   ›Reveal solutionSolution

   Free entry and exit is a feature of the perfectly competitive market.

   In a perfectly competitive market, there is free entry and exit of firms — there are no barriers, so firms can enter when there are super-normal profits and leave when there are losses. This ensures that in the long run every firm earns only …

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3. CBSE 2026Set ANNUAL1 markMCQ
   Q.Write True or False: In a perfectly competitive market firms are price-determinators.

   (a) True

   (b) False

   ›Reveal solutionSolution

   False — firms in perfect competition are price-takers, not price-determinators.

   Under perfect competition there are very many firms each selling a homogeneous product, and each firm's output is negligible relative to the market. Hence no firm can influence or set the price; it must accept (take) the price determined by overall market demand and supply. So firms are **p …

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4. CBSE 2026Set ANNUAL1 markMCQ
   Q.In perfect competition, a firm-

   (a) determines price

   (b) accept price

   (c) Both

   (i) and

   (ii)

   (d) None of these

   (a) determines price

   (b) accept price

   (c) Both

   (i) and

   (ii)

   (d) None of these

   ›Reveal solutionSolution

   A firm under perfect competition is a price-TAKER, accepting the market price.

   Because a very large number of firms sell an identical (homogeneous) product under perfect competition, no single firm's output decision is large enough relative to the total market to influence the price. Each firm therefore faces a given, fixed market price and simply decides how MUCH to sell at that price — it 'accepts' the price rather than 'determining' it. This is the opposite of Monopoly/Olig …

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5. CBSE 2025Set MARCH1 markMCQ
   Q.The Equilibrium price in a perfectly competitive market when free entry and exit is allowed.

   (a) P = Maximum of TR

   (b) P = Minimum of TR

   (c) P = Maximum of AC

   (d) P = Minimum of AC

   ›Reveal solutionSolution

   With free entry and exit, long-run equilibrium price equals the minimum of the average cost curve — option (d).

   …

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6. CBSE 2025Set MARCH1 mark
   Q.Fill in the blank by choosing correct answer from the bracket (Financial, Government, RBI, Perfect competition, Product, Private): Price taking behaviour is the distinguishing characteristic of __________ market.

   ›Reveal solutionSolution

   The blank is filled by 'Perfect competition'.

   A perfectly competitive market has a large number of buyers and sellers, a homogeneous product, and free entry and exit. Because each firm is very small relative to the whole market, no single firm can affect the price by changing its own output. Every firm therefore takes the market-determined …

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7. CBSE 2025Set ANNUAL1 markMCQ
   Q.Market situation where there is only one buyer is (A) Monopoly (B) Monopsony (C) Duopoly (D) None of these

   ›Reveal solutionSolution

   A market with a single buyer is a monopsony, so the answer is (B).

   Market structures are classified by the number of buyers and sellers. Monopoly means a single seller; duopoly means two sellers. When there is only one buyer facing many sellers, the market is a monopsony — the lone buyer has buying (monopsony) power over price. A common real example is a single large employer in a local labour market. Hence the situation with only one buyer is monopsony. (Non-compet …

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8. CBSE 2025Set ANNUAL1 markMCQ
   Q.In which market is product differentiation found? (A) Pure competition (B) Perfect competition (C) Monopoly (D) Monopolistic competition

   ›Reveal solutionSolution

   Product differentiation is found in monopolistic competition, so the answer is (D).

   In perfect and pure competition, all firms sell an identical (homogeneous) product, so there is no product differentiation. In monopoly there is a single firm and a single product, so differentiation does not arise either. Monopolistic competition has many firms selling closely related but differentiated products — distinguished by brand name, design, packaging, quality or advertising (for example, different brands of toothpaste or soap). This product differentiation gives each firm some control over its pr …

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9. CBSE 2025Set ANNUAL1 markMCQ
   Q.The concept of monopolistic competition is given by (A) Hicks (B) Chamberlin (C) Mrs. Robinson (D) Samuelson

   ›Reveal solutionSolution

   The concept of monopolistic competition was given by Chamberlin, so the answer is (B).

   Edward H. Chamberlin propounded the theory of monopolistic competition in his book 'The Theory of Monopolistic Competition' (1933), analysing markets with many firms selling differentiated products. Around the same time, Joan Robinson developed the related theory of 'imperfect competition', but the specific term and framework of monopolistic competition are credited to Chamberlin. Hicks and Samuelson are associated with o …

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10. CBSE 2025Set ANNUAL1 markMCQ
    Q.What is the type of demand curve of monopoly? (A) Inelastic (B) Elastic (C) Perfectly elastic (D) Perfectly inelastic

    ›Reveal solutionSolution

    A monopoly faces a downward-sloping, relatively elastic demand curve, so the answer is (B) Elastic.

    Under monopoly there is a single firm, so the firm's demand curve is the entire market demand curve, which slopes downward from left to right. To sell more, the monopolist must lower the price, so the curve is not perfectly elastic (a horizontal line, which belongs to perfect competition) and not perfectly inelastic (a vertical line). It is an ordinary downward-sloping demand curve, i.e. elastic/sloping rather than a straight horizontal or vertical line. Among the given …

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11. CBSE 2025Set ANNUAL1 markMCQ
    Q.The single most distinguishing characteristic of perfect competition is - (A) Goods discrimination (B) Price taking behaviour of a firm (C) Excess profit (D) Price rigidity

    ›Reveal solutionSolution

    The defining feature of perfect competition is that firms are price-takers, so (B) is correct.

    In the RBSE/CBSE Class-12 chapter on the firm under perfect competition, the market has a very large number of buyers and sellers trading a homogeneous (identical) product, with free entry and exit and perfect information. The combined result of these conditions is that no individual firm can affect the market price — the price is set by overall market demand and supply, and each firm must take that price as given.

    …

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12. CBSE 2025Set ANNUAL1 mark
    Q.Fill in the blank: Free entry and exit of the firm implies that the market price will always be equal to ________.

    ›Reveal solutionSolution

    The blank is the minimum of average cost — free entry and exit pushes long-run price to minimum AC, leaving only normal profit.

    In the RBSE/CBSE Class-12 chapter on the firm under perfect competition, free entry and exit is a key feature. If existing firms earn super-normal profit, new firms enter, raising supply and lowering price; if firms make losses, some exit, reducing supply and raising price. This process continues until every firm earns only normal profit (zero economic profit).

    …

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