In a perfectly competitive market, which of the following events typically occur in the market-place?

• A. Firms are price takers and cannot influence the market price.
• B. There are significant barriers to entry for new firms.
• C. Products are differentiated by branding and advertising.
• D. Many buyers and sellers interact, each with negligible market power.

Answer: (D)

Verified step by step guidance

1. Understand the characteristics of a perfectly competitive market: many buyers and sellers, homogeneous products, free entry and exit, and firms are price takers.
2. Recognize that in perfect competition, firms cannot influence the market price because each firm is small relative to the market, so they are price takers.
3. Note that there are no significant barriers to entry or exit in a perfectly competitive market, allowing new firms to enter freely if profits exist.
4. Understand that products in perfect competition are homogeneous, meaning they are identical and not differentiated by branding or advertising.
5. Conclude that the typical events in a perfectly competitive market include many buyers and sellers interacting with negligible market power, firms being price takers, no product differentiation, and free entry and exit.