Which market structure is characterized by many firms competing with identical products?

The market structure characterized by many firms competing with identical products is perfect competition. In this environment, numerous sellers offer a homogeneous product, which means that consumers view these products as identical regardless of the seller. This leads to a situation where individual firms are price takers; they cannot influence prices or market conditions because their output levels are small relative to the total market supply. The existence of perfect competition ensures that firms operate at optimal efficiency, and any profits in the short run will attract new firms into the market, ultimately driving profits down to a normal level in the long run.

In contrast, other market structures such as monopolistic competition feature many firms selling similar but not identical products, allowing for some degree of product differentiation. Oligopoly consists of a few large firms, which may sell identical or differentiated products, but their interdependent decision-making can lead to different market dynamics. Lastly, a monopoly occurs when a single firm dominates the market and sells a unique product, eliminating competition entirely. Understanding these distinctions highlights why perfect competition is uniquely defined by a multitude of firms offering identical products.