In a competitive market, a very large number of small sellers who sell identical products imply which of the following market characteristics?

• A. Barriers to entry are high.
• B. Each seller faces a downward-sloping demand curve.
• C. Products are differentiated by branding.
• D. No individual seller can influence the market price.

Answer: (D)

Verified step by step guidance

1. Understand the definition of a perfectly competitive market: it consists of many small sellers offering identical (homogeneous) products, with no single seller able to influence the market price.
2. Recognize that in such a market, barriers to entry are low, allowing new firms to enter freely, which contradicts the option stating 'Barriers to entry are high.'
3. Recall that each individual seller in a perfectly competitive market faces a perfectly elastic (horizontal) demand curve at the market price, not a downward-sloping one, because they are price takers.
4. Note that products are identical and not differentiated by branding or other features, so the option about product differentiation is incorrect.
5. Conclude that the key characteristic is that no individual seller can influence the market price, as the market price is determined by overall supply and demand.