Which of the following is not a characteristic of a competitive market?

Which of the following is not a characteristic of a competitive market?

(a) Buyers and sellers are price takers

(b) Each firm sells a virtually identical product

(c) Free entry is limited

(d) Each firm chooses an output level that maximizes profits.

Answer: (c) Free entry is limited

Another condition is the freedom of entry or exit of firms, meaning that no barrier exists that prevents new firms from joining the market or old firms from leaving the market. Free entry means that any new firms can enter the sector freely, in search of making profits that are greater than the average cost. The same competition returns a profit to the normal range this can easily be explained. On the other hand, there are no limitations on firms to withdraw from the market, whether they are realizing losses or not. Limited or restricted entry would erect barriers, thus eliminating the elasticity factor where firms can freely move in the market until they achieve the state of equilibrium. Hence free entry can be accorded as the characteristic of a perfectly competitive market structure rather than limited entry. By doing so, it ensures that no firm is dominant and maintains credible competition so that the consumers gain through a higher quantity which is likely to be cheaper in the long run.