PERFECT COMPETITION

Question 2

What are the characteristics of perfect competition?

Answer 2

1. No barriers to entry
2. Perfect knowledge
3. Homogenous product
4. Many buyers and sellers who are price takers

Question 3

Is perfect competition realistic?

Answer 3

In practice, no such thing exists - model used as a theoretical benchmark - perfect competition is an “ideal” solution

Question 4

Where do we assume firms produce at in perfect competition?

Answer 4

MC=MR as firms are SR profit maximisers.

Question 5

How efficient would a firm be under perfect competition in the LR?

Answer 5

Productively and allocatively efficient