Identify and discuss THREE features which could be used in determining if a company operates in a perfect competition.
1) The company produces something "generic" (e.g., mill lumber) that is also produced by several other compeating companies.
2) The company sells in a market where there are lots of buyers and lots of sellers.
3) The company does not determine the price of it's output; it sells at a market rate.
To determine if a company operates in perfect competition, you can look for three key features:
1) Homogeneous or generic product: In perfect competition, companies produce goods or services that are identical or very similar to those offered by other competing firms. This means that consumers perceive no significant differences between competing products. For example, if a company produces and sells mill lumber, which is also produced by several other companies, it indicates that they are operating in a perfect competition market.
2) Many buyers and sellers: Perfect competition is characterized by a large number of buyers and sellers in the market. This implies that no individual company has enough market power to influence or control the market price. If there are numerous buyers and sellers present for a particular product or service, it suggests that the company operates in a perfectly competitive environment.
3) Price taker: Another characteristic of perfect competition is that companies have no control over the price of their products or services. They are price takers, meaning they accept the prevailing market price as determined by the forces of supply and demand. If a company does not have the ability to set prices and instead sells its output at the market rate, this indicates a perfect competition setting.
Overall, these three features - a homogeneous product, many buyers and sellers, and being a price taker - collectively signify whether a company operates in a perfect competition market.