Which of the following is NOT a characteristic of a competitive market?

• A. Products are differentiated
• B. There are many buyers and sellers
• C. Firms are price takers
• D. There is free entry and exit

Answer: (A)

Verified step by step guidance

1. Step 1: Understand the characteristics of a perfectly competitive market. These typically include: many buyers and sellers, homogeneous (identical) products, firms are price takers, and free entry and exit in the market.
2. Step 2: Analyze the option 'Products are differentiated.' In a perfectly competitive market, products are not differentiated; they are identical or homogeneous, meaning consumers see no difference between products from different sellers.
3. Step 3: Review the other options: 'There are many buyers and sellers' aligns with perfect competition, as does 'Firms are price takers' because no single firm can influence the market price, and 'There is free entry and exit' which ensures no long-term economic profits.
4. Step 4: Conclude that the characteristic that does NOT belong to a competitive market is 'Products are differentiated' because product differentiation is a feature of imperfect competition, such as monopolistic competition.
5. Step 5: Summarize that identifying the key traits of market structures helps distinguish competitive markets from others, and product differentiation is a key factor that excludes a market from being perfectly competitive.