Multiple Choice
Identical products, as well as a large number of buyers and sellers, are characteristics of which type of market structure?
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11. Perfect Competition
Characteristics of Perfect Competition
Multiple Choice
Which of the following best describes pure competition in microeconomics?
A
A market structure where many firms sell identical products and no single firm can influence the market price.
B
A market structure where there are significant barriers to entry and only a few firms compete.
C
A market structure where a single firm dominates and sets the price for the entire market.
D
A market structure where firms sell differentiated products and have some control over prices.
Verified step by step guidance1
Step 1: Understand the concept of pure competition (also known as perfect competition) in microeconomics. It is a market structure characterized by many firms selling identical (homogeneous) products.
Step 2: Recognize that in pure competition, no single firm has the power to influence the market price because each firm's output is small relative to the total market supply.
Step 3: Identify that there are no significant barriers to entry or exit in a purely competitive market, allowing firms to freely enter or leave the market.
Step 4: Compare the given options to these characteristics: the correct description should mention many firms, identical products, and no single firm influencing price.
Step 5: Conclude that the option stating 'A market structure where many firms sell identical products and no single firm can influence the market price' best describes pure competition.
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