Q18 in Reading 13 states this :
In an industry comprised of three companies, which are small-scale manufacturers of an easily replicable product unprotected by brand recognition or patents, the most representative model of company behavior is:
B) Perfect competition
Right answer is B. Perfect competition. The justification was this:
The credible threat of entry holds down prices and multiple incumbents are offering undifferentiated products.
Isn’t perfect competition a market with many sellers and buyers. How can we talk about a perfect competition when there is only 3 sellers?