Perfect competition

?
  • Created by: Jade
  • Created on: 29-11-12 15:15
What is perfect competition?
Perfect competition is a market structure with many buyers and sellers, free entry and exit and an identical product
1 of 7
If Company A is operating in a perfectly competitive market. Company A want to increase its revenue. It decides to cut prices. What action will their competitors take in response?
Competitors are price takers and will cut their prices as well
2 of 7
Could Company A, working in a perfectly competitive market, increase revenue?
No, because their price elasticity of demand is perfectly elastic therefore demand is completely responsive to a change in price. So an increase in price would lead to a decrease in revenue
3 of 7
Firms in a perfectly competitive market face a?
Perfectly elastic demand curve
4 of 7
Business in perfect competition make?
Normal profit
5 of 7
The business is working at abnormal profits before new competitors enter the market. What will happen to profit when new firms enter?
Firms will receive normal profits
6 of 7
Perfect competition is?
A theoretical model used to assess other market structures
7 of 7

Other cards in this set

Card 2

Front

If Company A is operating in a perfectly competitive market. Company A want to increase its revenue. It decides to cut prices. What action will their competitors take in response?

Back

Competitors are price takers and will cut their prices as well

Card 3

Front

Could Company A, working in a perfectly competitive market, increase revenue?

Back

Preview of the front of card 3

Card 4

Front

Firms in a perfectly competitive market face a?

Back

Preview of the front of card 4

Card 5

Front

Business in perfect competition make?

Back

Preview of the front of card 5
View more cards

Comments

No comments have yet been made

Similar Economics resources:

See all Economics resources »See all Competitive markets resources »