The Four Characteristics of a Competitive Market

557 Words Feb 23rd, 2018 2 Pages
There are four characteristics of a perfectly competitive market including a large number of firms, the product sold by all of the firms within the same market is identical, firms have access to information regarding pricing, and freedom to enter or exit the industry without serious implications.
Each firm in the industry is a price taker meaning the firm takes the price as given. The price is determined outside of the individual firm and cannot be influenced by the firm itself. Due to the large number of firms within the market no single firm can take control over the price of a product or the quantity in which the product is exchanged. Therefore, if one firm decides to stop producing entirely, the market as a whole is unaffected.
Another characteristic of a perfectly competitive market is that the product sold in the industry is indistinguishable between firms. This allows buyers to choose from a large number of sellers without the ability to distinguish any differences. This includes the ability to distinguish which firm produces the product by eliminating brand names or other distinguishing features that differentiate products by firm. Every firm, therefore, produces a good that is a perfect substitute for the product produced by another firm in the same market. This results in the inability to raise the price of the…
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