Question

A single firm in a perfectly competitive market is relatively small compared to the rest of the market. What does this mean? How “small” is “small”?

Short answer

Single firm in perfect competition is small in regards to possessing insignificant share of market supply, price etc.

Step-by-step solution

Definition 

It is a market where large number of buyers and sellers exchange homogenous goods at uniform prices, with perfect information.

Explanation 

As the number of sellers are very large, they have small ie insignificant share in total market supply. So, they are small (insignificant) in regards to controlling price & have to take market price only.

Buyers have perfect information about similarity of goods. So, they are also indifferent among all sellers' goods. So, no firm can charge higher price and just sell as a small part under the huge market umbrella.