Perfect Competition

Created by: LucyHiggins
Created on: 23-12-15 10:54

What are the 4 assumptions of perfect competition

1. no barriers to entry or exit 2.firms produce homogenous products (identical) 3.Perfect knowlege of price (price transparancy) 4.large number of buyers and sellers-all too small to effect market (price takers)

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Name examples of perfect competition

Foreign exchange rate, many agricultural products eg King Edward potatoes

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allocatively efficient in PC

Becasue the LR equalibrium occurs where P=MC

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Productively efficient in PC

Becasue firms produce at the lowest point on the SRAC

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X-efficient in PC

Competition between firms will act as a spur to increase efficiency and make sure firms use the best combination of inputs

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Other cards in this set

Card 2

Front

Name examples of perfect competition

Back

Foreign exchange rate, many agricultural products eg King Edward potatoes

Card 3

Front

allocatively efficient in PC

Back

Card 4

Front

Productively efficient in PC

Back

Card 5

Front

X-efficient in PC

Back

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Perfect Competition