The correct answer is: C. Both 1 and 3
Perfect competition is a market structure in which there are many buyers and sellers of a homogeneous product, no barriers to entry or exit, and perfect information.
- Very large number of buyers and sellers
In a perfectly competitive market, there are many buyers and sellers of a homogeneous product. This means that no individual buyer or seller has a significant impact on the market price.
- No barriers to entry or exit
In a perfectly competitive market, there are no barriers to entry or exit. This means that firms can freely enter or exit the market without facing any significant costs or restrictions.
- Perfect information
In a perfectly competitive market, buyers and sellers have perfect information about the product, the prices of other products, and the costs of production. This means that buyers and sellers are able to make informed decisions about what to buy and sell.
The following are not true for perfect competition:
- Restriction on entry and exit of firms
In a perfectly competitive market, there are no barriers to entry or exit. This means that firms can freely enter or exit the market without facing any significant costs or restrictions. However, in some markets, there may be government regulations or other factors that restrict the entry of new firms.
- Perfectly elastic demand
In a perfectly competitive market, the demand curve for each firm is perfectly elastic. This means that the firm can sell as much or as little of its product as it wants at the market price. However, in reality, the demand curve for most firms is not perfectly elastic. This is because firms often have some control over the price of their product.
In conclusion, the correct answer is: C. Both 1 and 3. A perfectly competitive market is characterized by a very large number of buyers and sellers, no barriers to entry or exit, and perfect information.