Question

Identify the characteristics of a perfectly competitive market. (select all that apply.)

a. Entry and exit for firms
b. Producers who are price makers
c. A standardized product
d. Producers who are price takers
e. A large number of buyers and sellers
f. A differentiated product

Answer 1

A perfectly competitive market is characterized by easy a. entry and exit for firms, c. a standardized product, e. a large number of buyers and sellers, and d. producers who are price takers, not price makers.

Step-by-step explanation:

In a perfectly competitive market, several characteristics are definitive:

• Entry and exit for firms: It is easy for firms to enter or leave the market, indicating minimal barriers to entry or exit.
• Producers who are price makers: This is incorrect as, in perfect competition, firms are 'price takers', not 'price makers.'
• A standardized product: Products offered by different sellers are undifferentiated and identical, leading to no brand loyalty or influence.
• Producers who are price takers: Firms must accept the market price as given; they have no influence over it.
• A large number of buyers and sellers: The market comprises many buyers and sellers, so no single party can influence the market price.
• A differentiated product: This is incorrect as the products in perfect competition are homogeneous.