Characteristics of a perfectly competitive market include:
A) the absence of transaction costs.
B) differentiated products.
C) few sellers, some with a large market share.
D) All of these are characteristics of a perfectly competitive market.

Question

Quizplus · Accepted Answer

The absence of transaction costs is a key characteristic of a perfectly competitive market. This means that buyers and sellers can freely enter and exit the market without incurring any additional costs beyond the purchase price. In addition, there are no barriers to entry or exit, meaning that new sellers can easily enter the market if they choose to do so.

B) Differentiated products are not a characteristic of a perfectly competitive market. In a perfectly competitive market, all products are the same or very similar, and buyers have no reason to prefer one seller's product over another.

C) Few sellers, some with a large market share, is also not a characteristic of a perfectly competitive market. In a perfectly competitive market, there are many buyers and sellers, with each seller holding a relatively small share of the overall market. This prevents any one seller from having significant market power or influence over the market price.

D) All of these are not characteristics of a perfectly competitive market. Only choice A, the absence of transaction costs, is a key characteristic of a perfectly competitive market.

Characteristics of a Perfectly Competitive Market Include