Which of the following best describes 'pure competition' in the context of competitive markets?

• A. A market structure where firms sell differentiated products and have some control over prices.
• B. A market structure where government regulation determines prices and output.
• C. A market structure where many firms sell identical products and no single firm can influence the market price.
• D. A market structure where a single firm dominates and sets prices for the entire market.

Answer: (C)

Verified step by step guidance

1. Step 1: Understand the concept of 'pure competition' by recalling its key characteristics in microeconomics. Pure competition, also known as perfect competition, is a market structure where many firms sell identical (homogeneous) products.
2. Step 2: Recognize that in pure competition, no single firm has the power to influence the market price because each firm's output is small relative to the total market supply. This means firms are price takers.
3. Step 3: Contrast pure competition with other market structures: monopolistic competition (differentiated products), monopoly (single firm dominance), and government-regulated markets (prices set by authorities).
4. Step 4: Identify that the correct description of pure competition is the one stating that many firms sell identical products and no single firm can influence the market price.
5. Step 5: Confirm that the other options describe different market structures and do not fit the definition of pure competition.