Chapter 3 Competitive Markets and Perfect Competition Flashcards by Lelouch Lamperouge

Flashcards in Chapter 3 Competitive Markets and Perfect Competition Deck (11)

Loading flashcards...

What are the five assumptions of perfect competition?

Price taker
Homogenous products
Freedom of entry and exit
Large number of buyers and sellers
Perfect knowledge

Define price taker

A firm has to accept the price ruling in the market

Homogenous

All products are the same irrespective of who makes them

Freedom of entry and exit

Any firm can enter the industry as there are no barriers to entry to keep them out

Large number of buyers and sellers

This is to ensure that the product is sold and the firm is a price taker

Readily available information

We assume that all firms have equal access to any technological improvements and that all firms have equal advantages. Thus firms are unlikely to engage in research and development as the results will be available to other firms

Why is p=AR=MR=D

The firm is thus faces a perfectly elastic d curve. P is unaffected by variations in output and so the MR resulting from an increase in sales by one output is constant and equal to price

Define allocative efficiency

The optimum allocation of scarce resources that best accords with consumers pattern of demand. Where P=MC.

Optimum output

The optimum combination of fixed and variable factors that minimise AC

Static efficiency

Efficiency at a point in time - includes allocative and productive efficiency

Dynamic efficiency

Efficiency over time and concerns the production of new products, new techniques and new processes,and for firms to undertake investment in R+D they need to make supernormal profits.

Chapter 3 Competitive Markets and Perfect Competition Flashcards Preview

Aqa Economics Unit 3 > Chapter 3 Competitive Markets and Perfect Competition > Flashcards

What are the five assumptions of perfect competition?

Price taker
Homogenous products
Freedom of entry and exit
Large number of buyers and sellers
Perfect knowledge

Define price taker

A firm has to accept the price ruling in the market

Homogenous

All products are the same irrespective of who makes them

Freedom of entry and exit

Any firm can enter the industry as there are no barriers to entry to keep them out

Large number of buyers and sellers

This is to ensure that the product is sold and the firm is a price taker

Readily available information

We assume that all firms have equal access to any technological improvements and that all firms have equal advantages. Thus firms are unlikely to engage in research and development as the results will be available to other firms

Why is p=AR=MR=D

The firm is thus faces a perfectly elastic d curve. P is unaffected by variations in output and so the MR resulting from an increase in sales by one output is constant and equal to price

Define allocative efficiency

The optimum allocation of scarce resources that best accords with consumers pattern of demand. Where P=MC.

Optimum output

The optimum combination of fixed and variable factors that minimise AC

Static efficiency

Efficiency at a point in time - includes allocative and productive efficiency

Dynamic efficiency

Efficiency over time and concerns the production of new products, new techniques and new processes,and for firms to undertake investment in R+D they need to make supernormal profits.

Decks in Aqa Economics Unit 3 Class (8):

Key Links

Subjects

Company

Find Us

Brainscape's Knowledge GenomeTM

Chapter 3 Competitive Markets and Perfect Competition Flashcards Preview

Aqa Economics Unit 3 > Chapter 3 Competitive Markets and Perfect Competition > Flashcards

What are the five assumptions of perfect competition?

Price takerHomogenous productsFreedom of entry and exitLarge number of buyers and sellersPerfect knowledge

Define price taker

A firm has to accept the price ruling in the market

Homogenous

All products are the same irrespective of who makes them

Freedom of entry and exit

Any firm can enter the industry as there are no barriers to entry to keep them out

Large number of buyers and sellers

This is to ensure that the product is sold and the firm is a price taker

Readily available information

We assume that all firms have equal access to any technological improvements and that all firms have equal advantages. Thus firms are unlikely to engage in research and development as the results will be available to other firms

Why is p=AR=MR=D

The firm is thus faces a perfectly elastic d curve. P is unaffected by variations in output and so the MR resulting from an increase in sales by one output is constant and equal to price

Define allocative efficiency

The optimum allocation of scarce resources that best accords with consumers pattern of demand. Where P=MC.

Optimum output

The optimum combination of fixed and variable factors that minimise AC

Static efficiency

Efficiency at a point in time - includes allocative and productive efficiency

Dynamic efficiency

Efficiency over time and concerns the production of new products, new techniques and new processes,and for firms to undertake investment in R+D they need to make supernormal profits.

Key Links

Subjects

Company

Find Us

Brainscape's Knowledge Genome^TM

Price taker
Homogenous products
Freedom of entry and exit
Large number of buyers and sellers
Perfect knowledge