Future Business Leader Achievments (FBLA) Economics Practice Exam

Which factor is NOT typically associated with a perfectly competitive market?

1. Homogeneous products

2. High barriers to entry

3. Price takers

4. No influence on market prices

The correct answer is: High barriers to entry

High barriers to entry are indeed not typically associated with a perfectly competitive market. In a perfectly competitive market, the conditions are characterized by a large number of firms selling identical (homogeneous) products, meaning that no single firm has significant market power to influence prices. All firms in such a market are considered price takers, accepting the market price as given. Additionally, in perfectly competitive markets, there are usually low barriers to entry, allowing new firms to enter the market freely if they see an opportunity for profit. This easy entry and exit help ensure that the market remains competitive and prices stay stable over time. In contrast, high barriers to entry would restrict new firms from entering the market, potentially leading to monopolistic or oligopolistic competition rather than perfect competition. Thus, the absence of significant barriers to entry is one of the defining features that distinguishes perfectly competitive markets from other market structures.