ACCA Applied Knowledge · Business and Technology · Microeconomic factors
Which of the following is a defining characteristic of a perfectly competitive market?
A perfectly competitive market has many buyers and sellers dealing in a homogeneous product, so each is a price taker. No single participant can influence the market price, unlike monopoly, oligopoly or monopolistic competition.
- AA few large firms dominate and each reacts to the others' pricing
- BMany buyers and sellers, each a price taker selling a homogeneous productCorrect
- CA single seller controls supply and sets the price
- DMany sellers each offering a highly differentiated product with some price-setting power
Explanation
In perfect competition there are many buyers and sellers selling identical products, so no single participant can influence the market price. Option A describes oligopoly, C describes monopoly, and D describes monopolistic competition.
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