Which characteristic does not describe a perfectly competitive market?
A)Firms produce identical or nearly identical products
B)Market price is beyond the control of any individual firm
C)A firm's demand curve is perfectly horizontal at the market price
D)Industry-level price elasticity is finite
E)Firm-level price elasticity of demand facing another perfect competitor is infinite

Question

Quizplus · Accepted Answer

In a perfectly competitive market, the industry-level price elasticity of demand is infinite, as buyers have many alternatives and can easily switch between them. Therefore, any change in the market price will cause a proportionate change in the quantity demanded of the product. A finite industry-level price elasticity would suggest that a change in the market price would not have a significant effect on the quantity demanded, which is not consistent with the characteristics of a perfectly competitive market.

Which Characteristic Does Not Describe a Perfectly Competitive Market