Which of the following characteristics does NOT describe a perfectly competitive market?

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

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, firms are price takers, and free entry and exit in the market.
2. Step 2: Analyze each option given in the problem and compare it to the characteristics of perfect competition.
3. Step 3: Recognize that 'Products are differentiated' means that products are not identical, which contradicts the assumption of homogeneous products in perfect competition.
4. Step 4: Confirm that 'There are many buyers and sellers', 'Firms are price takers', and 'There is free entry and exit' are all consistent with perfect competition.
5. Step 5: Conclude that the characteristic that does NOT describe a perfectly competitive market is 'Products are differentiated' because perfect competition requires identical products.