Multiple Choice
Which of the following is characteristic of a purely competitive seller's demand curve?
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11. Perfect Competition
Characteristics of Perfect Competition
Multiple Choice
Which of the following is NOT a characteristic of a perfectly competitive market structure?
A
There are many buyers and sellers
B
Firms are price takers
C
There is free entry and exit in the market
D
Products are differentiated
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, and homogeneous (identical) products.
Step 2: Analyze each option given in the problem against these characteristics. For example, 'many buyers and sellers' aligns with perfect competition.
Step 3: Recognize that 'firms are price takers' means no single firm can influence the market price, which is true in perfect competition.
Step 4: Note that 'free entry and exit' means firms can enter or leave the market without restrictions, another key feature of perfect competition.
Step 5: Identify that 'products are differentiated' contradicts the perfect competition assumption because products must be identical or homogeneous, so this is NOT a characteristic of a perfectly competitive market.
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