Which of the following is a characteristic of competitive markets?

• A. There are significant barriers to entry.
• B. Products are highly differentiated.
• C. Firms can easily influence the market price.
• D. There are many buyers and sellers.

Answer: (D)

Verified step by step guidance

1. Understand the definition of a competitive market: It is a market structure characterized by many buyers and sellers, where no single participant can influence the market price.
2. Identify key characteristics of competitive markets: These include many buyers and sellers, homogeneous (identical) products, free entry and exit (no significant barriers), and firms being price takers (unable to influence price).
3. Analyze each option given in the problem: 'Significant barriers to entry' contradicts free entry, 'Products are highly differentiated' contradicts homogeneous products, and 'Firms can easily influence the market price' contradicts the price taker assumption.
4. Recognize that the correct characteristic is 'There are many buyers and sellers' because it aligns with the fundamental definition of a competitive market.
5. Summarize that competitive markets have many participants and no single firm can control the price, ensuring that the market price is determined by overall supply and demand.