What term describes a market situation with many firms supplying identical products?

The term that describes a market situation with many firms supplying identical products is pure competition. In a pure competition market structure, there are numerous sellers and buyers, and the products offered by these firms are perfectly homogeneous, meaning that consumers view them as identical. This situation implies that no single firm can influence the price of the product; instead, the market determines the price through supply and demand dynamics.

In pure competition, the ease of entry and exit into the market is also a characteristic feature, allowing firms to enter or leave without significant barriers, which contributes to the ideal of a competitive marketplace. Each firm's actions do not affect market prices significantly because they are small relative to the entire market. This structure leads to efficient allocation of resources and maximizes consumer welfare, as firms operate at the lowest point of their average cost curves in the long run.