Question

Assertion (A): Perfect competition is characterised by a seller being a price-taker and not a price-maker.

Reason (R): There is no restriction on the entry and exit of the firms in a perfectly competitive market.

Options

• Both Assertion (A) and Reason (R) are true, and Reason (R) is the correct explanation of Assertion (A).

• Both Assertion (A) and Reason (R) are true, but Reason (R) is not the correct explanation of Assertion (A).

• Assertion (A) is true, but Reason (R) is false.

• Assertion (A) is false, but Reason (R) is true.

Answer 1

Both Assertion (A) and Reason (R) are true, but Reason (R) is not the correct explanation of Assertion (A).

Explanation:

Both statements are true: a perfectly competitive firm is a price-taker, and firms can freely enter or exit the market. However, price-taking results primarily from the large number of sellers and the firm’s negligible share of total supply, not from freedom of entry and exit.