Perfect competition is a market structure with:

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BlackTom AI · Accepted Answer

When evaluating the hallmark features of perfect competition, we must compare each option to the standard characteristics.
Option 1: 'few firms' would imply a market with concentration and potential market power, which contradicts perfect competition where many firms are present. This would more closely resemble an oligopoly rather than perfect competition.
Option 2: 'one firm' describes a monopoly, where a single seller dominates the market and sets the price, again not aligned with perfect competition.
Option 3: 'price-taking firms' correctly reflects a key attribute of perfect competition: each firm is too small relative to the market to influence the price, so all firms accept the prevailing market price. This is consistent with the idea of perfectly elastic demand faced by individual firms and no barriers to entry that would allow firms to set prices.
Option 4: 'numerous firms whose products are imperfect substitutes' implies that products are differentiated or not perfectly substitutable, which contradicts the perfect competition assumption of homogeneous (identical) products and perfect substitutability.
Therefore, the option that matches the defining feature of perfect competition is price-taking firms, since it captures the idea that firms must accept the market price and cannot influence it on their own.

ECON3200001.1251 Homework Assignment 7

Perfect competition is a market structure with:

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