Which of the following is not a characteristic of a competitive market?

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

Answer: (B)

Verified step by step guidance

1. Step 1: Understand the characteristics of a perfectly competitive market. These typically include: many buyers and sellers, homogeneous (identical) products, free entry and exit of firms, and firms being price takers.
2. Step 2: Analyze each option given in the problem against these characteristics.
3. Step 3: 'There are many buyers and sellers' matches the characteristic of many participants in the market, which is true for competitive markets.
4. Step 4: 'There is free entry and exit' aligns with the characteristic that firms can enter or leave the market without restrictions, which is true for competitive markets.
5. Step 5: 'Firms are price takers' means firms accept the market price without influence, which is a key feature of competitive markets. However, 'Products are differentiated' implies that products are not identical, which contradicts the assumption of homogeneous products in competitive markets, making this the characteristic that does not belong.