In the realm of economics, perfect competition is a theoretical market structure characterized by several key features. Let’s examine the choices provided:
- a) A large number of buyers and sellers: This is indeed a feature of perfect competition. The presence of many buyers and sellers ensures that no single entity can influence the market price.
- b) Firms can set their own prices: This statement is not true in the context of perfect competition. Firms in a perfectly competitive market are price takers, meaning they must accept the market price as given and cannot set their own prices.
- c) No restrictions on entry into or exit from the industry: Perfect competition also includes free entry and exit, allowing firms to enter the market when they can make a profit and exit when they incur losses.
- d) Buyers and sellers are well informed about prices: In perfect competition, it is assumed that both buyers and sellers have complete information regarding prices and available goods in the market.
Based on this analysis, the correct answer to the question is b) Firms can set their own prices, as this is a characteristic that does not belong to the perfect competition model.