Question

Explain why perfect competition is a theoretical situation.

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Perfect competition is a theoretical situation because it does not reflect the real market as it is difficult to meet the criteria of perfect competition at a market which are as follows: 1- A large number of small firms are present and compete against each other. 2- All small firms produce identical products . 3- Firms are price takers, they do not control the price of the product. 4- No place for incomplete information about the product between seller and buyer. 5- There is a free entry and exit to the market.

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