Which of the following is true for a perfectly competitive market?

• A. There are significant barriers to entry for new firms.
• B. Firms can set prices above the market equilibrium.
• C. Products sold by firms are highly differentiated.
• D. Firms are price takers and cannot influence the market price.

Answer: (D)

Verified step by step guidance

1. Understand the characteristics of a perfectly competitive market: many firms, identical products, free entry and exit, and perfect information.
2. Recognize that in perfect competition, firms are price takers, meaning they accept the market price as given and cannot influence it.
3. Note that there are no significant barriers to entry or exit, allowing new firms to enter the market freely if profits exist.
4. Identify that products sold by firms in perfect competition are homogeneous (identical), not differentiated.
5. Conclude that firms cannot set prices above the market equilibrium because buyers would switch to other sellers offering the market price.