4.1 - perfect competition Flashcards
Perfect competition
1
Q
Characteristics of perfect competition
A
Lots of firms
Low barriers to entry / exit (low sunk costs)
Produce identical products
Price takers
Perfect information and knowledge
2
Q
In the Long run, can firms have supernormal profit in perfect competition
A
No, new firms will join decreasing demand and lowering profits.
3
Q
X efficiency
A
Measures how successfully a firm keeps its costs down
4
Q
Advantages of perfect competition
A
Low prices
Allocatively efficient
Productively efficient
5
Q
Disadvantages of perfect competition
A
Identical products / services
