Perfect Competition Flashcards
What are the characteristics of perfect competition
Many buyers and sellers
Homogenous goods
Price takers
No barriers to entry or exit
Perfect information
Firms are profit maximisers
Where is the profit maximising point
MC=MR
What profit is made in the long run in perfect competition
Normal profit
What type of profit is made in the short running perfect competition
Supernormal profit
Why do new firms join the market? Why can they enter
Supernormal profit
No barriers to entry and perfect information
What happens as new firms enter the market
Supply shifts to the right
Lowering price until there is no more incentive (supernormal profit)
Normal profit it left over
In the long run what efficiencies does perfect competition have
Allocative efficiency
Productive efficiency
X efficiency
In the long run what efficiencies does perfect competition not have
Dynamic efficiency
