Perfect competition

Question 1

Characteristics of perfectly competitive market structure

Answer 1

• Many buyers and sellers
• Each firms selling homogeneous goods and services (Identical g&s) therefore firms are price takers (They have no ability to set their own prices) if a new firm enters the market they have to set same prices as all competitors
• No barriers to entry/exit
• Perfect information (Consumers know about prices and quality in the market/Producers know about Prices, Technology and costs in market)
• Firms are profit maximisers (Firms produce where MC=MR)