Which of the following is true under conditions of pure competition?

• A. There are significant barriers to entry for new firms.
• B. Firms can set prices above the market equilibrium.
• C. Firms are price takers and cannot influence the market price.
• D. Products are highly differentiated among firms.

Answer: (C)

Verified step by step guidance

1. Understand the characteristics of a purely competitive market: many firms, identical products, free entry and exit, and firms are price takers.
2. Analyze the statement about barriers to entry: in pure competition, barriers to entry are low or nonexistent, so significant barriers are not true.
3. Consider the pricing power of firms: in pure competition, individual firms cannot set prices above the market equilibrium because the market determines the price; firms are price takers.
4. Evaluate product differentiation: in pure competition, products are homogeneous (identical), so high differentiation is not a characteristic.
5. Conclude that the true statement is that firms are price takers and cannot influence the market price, which aligns with the fundamental assumptions of pure competition.