The four important characteristics that define a perfectly competitive market are:
A) a standardized good, full information, no transaction costs, and price-taking participants.
B) standardized information, a finished good, no transaction costs, and price-making participants.
C) a standardized good, the same information for buyers and sellers, low transaction costs, and price-taking participants.
D) a standardized good, full information, no transaction costs, and price-making participants.

Question

Quizplus · Accepted Answer

A perfectly competitive market is characterized by the presence of a standardized good, full information, no transaction costs, and price-taking participants. In such a market, all firms produce homogeneous products that are indistinguishable from each other, and buyers and sellers have access to information about the market, which enables them to make informed decisions. Furthermore, there are no barriers to entry or exit, and participants are price takers, meaning they have no control over market prices and must accept the prevailing prices. This results in a highly efficient market where prices are determined solely by supply and demand.

The Four Important Characteristics That Define a Perfectly Competitive Market