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

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

Answer: (C)

Verified step by step guidance

1. Understand the concept of a perfectly competitive market: it is a market structure characterized by many buyers and sellers, where no single firm can 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.
3. Recognize that products in perfectly competitive markets are homogeneous or identical, not highly differentiated.
4. Note that there are no significant barriers to entry or exit in perfectly competitive markets, allowing firms to freely enter or leave the market.
5. Evaluate each option against these characteristics to identify that 'Firms are price takers' correctly describes a feature of perfectly competitive markets.