Which of the following firms is the closest to being a perfectly competitive firm?

• A. A national airline company
• B. A wheat farmer in a large agricultural region
• C. A local electricity provider
• D. A smartphone manufacturer

Answer: (B)

Verified step by step guidance

1. Step 1: Understand the characteristics of a perfectly competitive firm. Such a firm operates in a market with many buyers and sellers, sells a homogeneous product, has no control over the market price (price taker), and faces free entry and exit in the market.
2. Step 2: Analyze each option in terms of these characteristics. For example, a national airline company typically has few competitors, differentiated services, and some control over pricing, so it is not perfectly competitive.
3. Step 3: Consider the wheat farmer in a large agricultural region. This farmer sells a homogeneous product (wheat), faces many competitors, and is a price taker because no single farmer can influence the market price. Entry and exit are relatively free in agriculture.
4. Step 4: Evaluate the local electricity provider, which usually operates as a monopoly or regulated firm with significant control over price and no close substitutes, so it is not perfectly competitive.
5. Step 5: Assess the smartphone manufacturer, which sells differentiated products, has market power, and faces competition but not perfect competition. Therefore, the wheat farmer is closest to being a perfectly competitive firm.