Which of the following is a characteristic of a perfectly competitive market? a. a large number of firms in a market b. selling a standardized product c. no barriers to entry d. all of the above

Option D

Explanation:

A. In a perfectly competitive market the number of firms is so large that no individual firm can affect the price. Thus, A is correct.

B. All firms in a perfect competition sells same product without any differentiation thus no firm can charge extra price. Thus, B is correct.

C. There are no barriers to entry and exit in the market therefore no firm can earn abnormal profits in long run.  Thus, C is correct.

Hence all the options given are characteristics of perfect competition.

Option (D) is correct.

Explanation:

Correct Option: All of the above.

In a perfectly competitive market, there are large number of buyers and sellers in a market. Single buyer and single seller won't be able to affect the price of the market.  

All the firms in this market scenario selling a standardized product.

Price of the product will be determined by the market forces. In this market, individual firms are generally facing a horizontal demand curve where price is equal to the marginal revenue. Because demand curve is parallel to x-axis and it is perfectly elastic, so there will be no changes in prices if there is a change in a demand.

Profit maximizing condition for the competitive firms is a point where price is equal to the marginal cost.