Which of the following is NOT a characteristic of the structure of perfectly competitive markets?

• A. Products are differentiated
• B. There are many buyers and sellers
• C. There is free entry and exit
• D. Firms are price takers

Answer: (A)

Verified step by step guidance

1. Step 1: Understand the defining characteristics of a perfectly competitive market. These typically include: many buyers and sellers, homogeneous (identical) products, free entry and exit of firms, and firms being price takers.
2. Step 2: Analyze the option 'Products are differentiated.' In a perfectly competitive market, products must be identical or homogeneous, meaning no differentiation exists between products offered by different sellers.
3. Step 3: Review the other options: 'There are many buyers and sellers,' 'There is free entry and exit,' and 'Firms are price takers.' All of these are standard characteristics of perfect competition.
4. Step 4: Conclude that the characteristic that is NOT part of perfect competition is 'Products are differentiated,' because product differentiation is a feature of imperfect competition, such as monopolistic competition.
5. Step 5: Summarize that the key to identifying the correct answer is knowing that perfect competition requires identical products, so any mention of product differentiation indicates a market structure other than perfect competition.