Perfect Competition Flashcards
(5 cards)
1
Q
Characteristics of perfect competition
A
- Large number of firms
- Homogenous products
- Low barriers to entry
- Firms are price makers
- Supernormal profits are competed away in the Long Run.
2
Q
Are firms allocatively efficient?
A
Yes
3
Q
Are firms productively efficient?
A
SR no, LR yes
4
Q
What type of profit is earned in the short run?
A
Supernormal profit
5
Q
What type of profit is earned in the long run?
A
Normal profit. Because supernormal profits are competed away due to more firms entering the market.
