Which of the following is a characteristic of perfectly competitive markets?

• A. Firms have control over market price
• B. Firms are price takers
• C. There are significant barriers to entry
• D. Products are highly differentiated

Answer: (B)

Verified step by step guidance

1. Understand the concept of a perfectly competitive market: it is a market structure characterized by many firms selling identical products, with no single firm able to influence the market price.
2. Recall that in perfectly competitive markets, firms are 'price takers,' meaning they accept the market price as given and cannot set their own prices because their individual output is too small to affect the overall market.
3. Recognize that significant barriers to entry do not exist in perfectly competitive markets; instead, there are free entry and exit conditions allowing firms to enter or leave the market easily.
4. Note that products in perfectly competitive markets are homogeneous or identical, not differentiated, so consumers see no difference between products from different firms.
5. Based on these characteristics, identify that the correct feature of perfectly competitive markets is that firms are price takers.