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Unformatted text preview: 1 Perfect Competition Short Run Perfect Competition Short Run Chapter 10-1 A Perfectly Competitive A Perfectly Competitive Market Market z A perfectly competitive market is one in which economic forces operate unimpeded. A Perfectly Competitive A Perfectly Competitive Market Market z A perfectly competitive market must meet the following requirements: z Both buyers and sellers are price takers. z The number of firms is large. z There are no barriers to entry. z The firms products are identical. z There is complete information. Perfect Competition Perfect Competition Perfect competition is a firm behavior that occurs when many firms produce identical products and entry is easy. Characteristics of perfect competition : z There are many sellers. z The products sold by the firms in the industry are identical. z Entry into and exit from the market are easy , and there are many potential entrants. z Buyers (consumers) and sellers (firms) have perfect information. 2 A Perfectly Competitive A Perfectly Competitive Market Market z For a market to be perfectly competitive, six conditions must be met: 1. Both buyers and sellers are price takers a price taker is a firm or individual who takes the price determined by market supply and demand as given 2. The number of firms is large any one firms output compared to the market output is imperceptible and what one firm does has no influence on other firms A perfectly competitive market is a market in which economic forces operate unimpeded 14-5...
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This note was uploaded on 12/08/2011 for the course ECON 201 taught by Professor Staff during the Fall '10 term at Rio Hondo College.
- Fall '10
- Perfect Competition