Economics Unit 3 - Competitive markets

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What are the 5 assumptions of perfect competition?
Large no. of buyers and sellers, Homogenous products, Perfect information, No entry/exit barriers, Price takers
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Why will perfect competition lead to an efficient allocation of resources?
There is a lack of externalities and there are economies of scale
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What are the benefits of perfect competition?
No information failure, Only normal profits made, Maximum possible consumer surplus, Allocative and productive efficiency
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Why are only normal profits possible with perfect competition?
If more sellers enter the industry, supply will shift right, which brings down the price. Because they are price takers, this decreases the profit maximisation point
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What are some examples of perfect competition?
What are some examples of perfect competition?
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Other cards in this set

Card 2

Front

Why will perfect competition lead to an efficient allocation of resources?

Back

There is a lack of externalities and there are economies of scale

Card 3

Front

What are the benefits of perfect competition?

Back

Preview of the front of card 3

Card 4

Front

Why are only normal profits possible with perfect competition?

Back

Preview of the front of card 4

Card 5

Front

What are some examples of perfect competition?

Back

Preview of the front of card 5

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