Which of the following is a characteristic of perfectly competitive markets?

• A. Significant barriers to entry for new firms
• B. Many buyers and sellers, each unable to influence the market price
• C. Firms having control over the prices they charge
• D. Firms selling differentiated products

Answer: (B)

Verified step by step guidance

1. Understand the definition of a perfectly competitive market: it is a market structure characterized by many buyers and sellers, where no single buyer or seller can influence the market price.
2. Recall that in perfectly competitive markets, products are homogeneous (identical), so firms sell identical products rather than differentiated ones.
3. Recognize that there are no significant barriers to entry or exit in perfectly competitive markets, allowing new firms to enter freely.
4. Note that firms in perfectly competitive markets are price takers, meaning they have no control over the prices they charge; the market determines the price.
5. Compare each option with these characteristics to identify the correct one: 'Many buyers and sellers, each unable to influence the market price' matches the key feature of perfect competition.