2. Perfect Competition
Homogenous
All firms sell an identical product (the
products are homogeneous).
Price Takers
All firms are price takers (they cannot
influence the market price of their products).
Firms to easily enter and exit the industry
with no Cost
In a perfect competition market structure, there are a large number of buyers and sellers. Perfect
competition occurs when there is a large number of small companies competing against each other.
Freedom of Entry & Exist
Buyers have complete or perfect information about
the product being sold and the prices charged by
each firm.
Perfect Information Availability
3. • Absence of Control:
No government intervention
• Factors of production:
Labor, capital,…etc have perfect mobility
• Profit Margin:
Each firm earns normal profit and no firms can earn super normal
• No incentive for innovation:
Profit margins fixed and sellers cannot increase pricing