Multiple Choice
Which of the following best describes the representative firm in a purely competitive industry?
72
views
11. Perfect Competition
Characteristics of Perfect Competition
Multiple Choice
Which of the following is NOT a characteristic of a perfectly competitive market?
A
Firms are price takers
B
Firms can easily enter and exit the market
C
There are many buyers and sellers
D
Products are differentiated by brand and quality
Verified step by step guidance1
Step 1: Understand the characteristics of a perfectly competitive market. These typically include: many buyers and sellers, firms are price takers, free entry and exit in the market, and homogeneous (identical) products.
Step 2: Analyze each option given in the problem against these characteristics. For example, 'Firms are price takers' aligns with perfect competition because no single firm can influence the market price.
Step 3: Consider 'Firms can easily enter and exit the market' which is also a key feature of perfect competition, ensuring no long-term economic profits.
Step 4: 'There are many buyers and sellers' is another hallmark of perfect competition, ensuring no single participant can control the market.
Step 5: Identify that 'Products are differentiated by brand and quality' contradicts the perfect competition assumption of homogeneous products, making this the characteristic that is NOT part of a perfectly competitive market.
Related Videos
Related Practice
