What is one characteristic of a market approaching perfect competition?

A market approaching perfect competition is characterized by greater efficiency in resource allocation. In such a market, many firms compete against each other to sell homogeneous products, leading to optimal utilization of resources. When firms are free to enter and exit the market, resources are directed towards the production of goods and services that consumers demand the most, helping to achieve an equilibrium where supply meets demand effectively.

In a perfectly competitive market, price equals marginal cost, which ensures that resources are allocated where they are most valued. This results in a situation where consumer welfare is maximized and firms operate at the lowest possible cost. Consequently, the benefits extend to consumers in terms of lower prices and greater availability of goods.

This characteristic of increased efficiency contrasts sharply with scenarios involving higher pricing, increased barriers to entry, or less variety of goods available, which typically describe less competitive or monopolistic markets. In such environments, inefficiencies may arise as firms face less competition, reducing their incentive to innovate or improve efficiency, leading to potential consumer drawbacks in terms of prices and options.