18 Perfect competition Flashcards

1
Q

perfect competition

A

market structure with many buyers and sellers that can achieve allocative and productive efficiency in the long run

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2
Q

conditions for perfect competition

A
  • many sellers/buyers - no dominance or control
  • no barriers to entry - can enter easily and compete
  • no barriers to exit - exit when it becomes unprofitable
  • price takers - must take market price because firms cant affect the market price
  • homogeneous products - no actual or perceived difference between different products on the market
  • perfect knowledge - all firms have all information of the actions and prices of the other firms in the market
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3
Q

short run perfect competition

A

market structure that has allocative efficiency but not productive efficiency

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4
Q

long run

A

market structure that has allocative efficiency and productive efficiency

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5
Q

Allocative efficiency

A

the optimal distribution of products
- price = marginal cost

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6
Q

productive efficiency

A

operating at lowest average cost
- marginal cost = bottom average cost

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