Which statement BEST describes a condition for the existence of a perfectly competitive market?
A)A small number of firms control the price of the good.
B)Barriers to entry exist because of scale economies.
C)Firms produce an identical product.
D)Extensive advertising is used to promote the firm's product.

Question

Quizplus · Accepted Answer

The existence of a perfectly competitive market requires firms to produce an identical product. This means that consumers cannot differentiate between the products of different firms and therefore cannot be influenced by branding or advertising. It also means that firms cannot differentiate their products in order to charge a higher price, as all products are considered equivalent in the eyes of the consumer.

Which Statement BEST Describes a Condition for the Existence of a Perfectly