Competitive markets

Question 1

Perfect competition

Answer 1

A hypothetical market where competition is at its greatest possible level

Question 2

6 Characteristics of perfect markets

Answer 2

Perfect knowledge
No barriers or sunk costs
Homogeneous products
Price taking firms
Many firms
Normal long run profits

Question 3

3 Advantages of perfectly competitive markets

Answer 3

Maximises consumer surplus
Maximum allocative and productive efficiency
Max consumer choice

Question 4

3 Disadvantages of perfectly competitive markets

Answer 4

No economies of scale
Homogeneous products
No R+D from prof and free rider discencentivises