CFA Level I · CFA Level I Exam · The Firm and Market Structures
An industry has a very large number of small sellers offering nearly identical products. Each seller is a price taker, and new firms can enter at little cost. This market structure is best described as:
The market is perfect competition. Many small sellers of nearly identical products who take the market price, together with low barriers to entry, define this structure. Monopolistic competition would require differentiated products, and oligopoly would require a few dominant sellers.
- AMonopolistic competition
- BPerfect competitionCorrect
- COligopoly
Explanation
Many sellers, identical products, price-taking behavior and easy entry are the features of perfect competition. Monopolistic competition involves differentiated products and some pricing power. Oligopoly has few sellers.
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