Question

Markets are classified into perfect and imperfect on the basis of:
A. Number of buyers and sellers
B. Degree of product differentiation
C. Free entry and exit
D. Time lag in the purchase and sale of commodity
E. Knowledge of demand, supply and commodity price

• A. A only
• B. A and B only
• C. A, B, C and E only
• D. B, C, D and E only

Hint:

Perfect competition requires homogeneity, free entry, perfect information, and a large number of participants. Any deviation from these four pillars creates an imperfect market.

Answer 1

The Correct Option is C

Step 1: Understanding the Concept:
Market structures are classified as perfect or imperfect based on key structural and behavior characteristics of buyers and sellers in the market.

Step 2: Detailed Explanation:
A Perfect Market (Perfect Competition) is defined by strict conditions:
1. A very large number of buyers and sellers (A) so no single participant can influence market price.
2. Homogeneous products, meaning there is zero product differentiation (B).
3. Free entry and exit of firms in the long run (C).
4. Perfect market knowledge among all buyers and sellers regarding prices and supply (E).
If any of these conditions are violated, the market is classified as Imperfect (such as Monopolistic Competition, Oligopoly, or Monopoly).
"Time lag in purchase and sale" (D) is a dynamic marketing behavior but is not a structural criterion used to classify markets as perfect or imperfect.
Therefore, A, B, C, and E are the defining criteria.

Step 3: Final Answer:
The correct criteria are A, B, C, and E, corresponding to Option (C).