4.2 Perfect Competition Flashcards
(6 cards)
1
Q
Key Assumptions
A
1) Homogenous products
2) Large number of firms
3) Low barriers to entry
4) Price takers
2
Q
Can supernormal profit be made in the long-run?
A
NO
3
Q
Economic efficiencies?
A
- Allocative
- Productive
- Dynamic BUT low profits
4
Q
Benefits for economic efficiency?
A
- Lower prices
- Low barriers to entry
- Need to innovate
5
Q
Evaluating assumptions?
A
1) Some firms have price setting power
2) Unrealistic
3) Rare costless barriers
6
Q
Examples of firms?
A
- Market fruit sellers
- Sporting bets
- Market flower sellers
