Characteristics of a perfectly competitive market include
A) The absence of transaction costs
B) Product homogeneity
C) Many sellers, each with a very small market share
D) All of these

Question

Quizplus · Accepted Answer

All three characteristics listed are essential to a perfectly competitive market. The absence of transaction costs ensures that buyers and sellers can easily enter and exit the market without incurring additional costs beyond the price of the good itself. Product homogeneity means that all products are identical, making it easy for consumers to compare prices and choose the lowest option. Many sellers with a small market share means that no individual seller has significant market power and each must compete solely on price. Together, these characteristics create a market where prices are determined by supply and demand with no single seller or buyer able to influence the market price.

Characteristics of a Perfectly Competitive Market Include