Final answer:
The incorrect characteristic of a purely competitive industry is that the industry or market demand is highly elastic. Actually, it's the demand curve of a perfectly competitive firm that is perfectly elastic, which means the firm can sell as much as it wants at the market price, as no single firm can influence the price.
Step-by-step explanation:
The question posed is focused on identifying which characteristic is not a necessary feature of a purely competitive industry. In a purely competitive market, commonly known as perfect competition, several defining characteristics are present:
- There must be a large number of firms producing homogenous or identical products.
- The firms should be so small relative to the market that no single firm can influence the market price; they are price takers.
- There must be free entry and exit from the market, indicating no substantial barriers for new firms to enter or existing firms to leave the industry.
- Consumers should have perfect information about the product and see no difference between the product of one firm and another.
The choice that indicates the market demand is highly elastic is the incorrect characteristic of a purely competitive industry. The demand curve that a perfectly competitive firm faces is perfectly elastic, meaning the firm can sell any quantity of its product at the prevailing market price, as there's no single firm influencing the price. Therefore, the market demand itself is not elastic; rather, the firm's demand curve is perfectly elastic due to the fact that firms are price takers in a perfectly competitive market.