What defines imperfect competition?

Imperfect competition is characterized by a market structure where a small number of sellers exist, each possessing some degree of market power. This market power allows these sellers to influence prices, which distinguishes imperfect competition from perfect competition, where numerous participants exist, and no single buyer or seller can affect the market price.

In imperfectly competitive markets, firms can differentiate their products or strategize around pricing, leading to potentially higher profits than in perfectly competitive markets. This reflects the economic realities where not all goods or services are perfect substitutes, allowing sellers to maintain control over their pricing and output levels.

The other options describe characteristics that do not align with the definition of imperfect competition. A market with numerous buyers and sellers reflects perfect competition. Identical products signify homogeneity, which is typically found in perfectly competitive markets, rather than in imperfectly competitive ones where product differentiation can occur. High barriers to entry can characterize both monopolies and oligopolies, but they do not solely define imperfect competition, as entry barriers can also exist in other market structures.