This Question: 1 pt 2 Which of the following is a characteristic of perfectly co

Question

This Question: 1 pt 2 Which of the following is a characteristic of perfectly competitive markets? A. There will be many firms in the market selling a differentiated product. O B. The barriers to new firms entering the market will be natural ones. O C. There will be many buyers but only a few firms, all of whom will charge the same price. D. The products sold by all firms in the market will be identical. 0 E. There will be only a few buyers but many firms, all of whom are small relative to the market. Click to select your answer Mac 20 esc F1 F3 15

Explanation / Answer

Perfect competition is a market structure in which the following criteria are met: 1) All firms sell an identical and homogeneous goods; 2) All firms are price takers and consumers are price takers. They cannot influence price on the individual level 3) All firms have a relatively small market share and so cannot affect the market variables; 4) Buyers have complete information about the product being sold and the prices charged by each firm; and 5) The industry is characterized by free entry and exit of firms.

Thus the correct answer to this question is option (d), since in a perfectly competitve market all goods sold are idenctical.

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