A perfectly competitive industry is characterized by which of the following?

• A. Many buyers and sellers, homogeneous products, and free entry and exit
• B. Single seller, unique product, and restricted entry
• C. Many buyers, differentiated products, and limited entry
• D. Few sellers, differentiated products, and significant barriers to entry

Answer: (A)

Verified step by step guidance

1. Understand the characteristics of a perfectly competitive industry: it involves many buyers and sellers, homogeneous (identical) products, and free entry and exit of firms.
2. Recognize that 'many buyers and sellers' means no single participant can influence the market price, ensuring price-taking behavior.
3. Note that 'homogeneous products' imply that all firms sell identical goods, so consumers have no preference for one seller over another based on the product itself.
4. Identify that 'free entry and exit' means firms can enter or leave the market without significant barriers, which keeps profits normal in the long run.
5. Compare these characteristics with the options given to determine which one matches the definition of perfect competition.