Which of the following best describes a perfectly competitive market?

• A. A market with many buyers and sellers, identical products, and no barriers to entry.
• B. A market where firms collude to set prices and output.
• C. A market dominated by a single seller with significant control over price.
• D. A market with a few large firms selling differentiated products.

Answer: (A)

Verified step by step guidance

1. Understand the characteristics of a perfectly competitive market: many buyers and sellers, identical (homogeneous) products, and no barriers to entry or exit.
2. Recognize that in perfect competition, no single buyer or seller can influence the market price because each participant is a price taker.
3. Identify that products are identical, meaning consumers see no difference between goods from different sellers, leading to perfect substitutability.
4. Note that there are no barriers to entry or exit, allowing firms to freely enter or leave the market based on profitability.
5. Compare these features with the given options to determine which description matches a perfectly competitive market.