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Perfect Competition

#topic/econ

Characteristic

  1. Many small firms Identical products (perfect Substitutes)
  2. Low Barriers to Entry - easy for firms to enter and exit the industry
    Seller has no need to advertise
  3. Firms are "Price Takers" - each firm has no control over price

Side-by-Side_Graphs_of_Firm_Taking_the_Price_from_the_Market.png

Perfect_Competition_Graph.png

Perfect Competition in the Long-Run

Firms will enter if there is Profit
Firms will leave if there is loss

So, all firms break even, they make NO Economic Profit (No Economic Profit = Normal Profit) In Long-Run Equilibrium a perfectly competitive firm is extremely efficient.
Price = Marginal Cost (MC) = Minimum Average Total Cost (ATC)

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Imperfect Competition
Comparison Table of The 5 Market Structure