lecture 2

Question 1

what are the assumptions of perfect competition

Answer 1

• -atomistic - large number of buyers and sellers.
• perfect knowledge
• products are homogenous - identical products
  -firms act independently (firms do not interact)
  -firms are free to exit and leave at will
  -firms can sell as much as they want
  -no transport cost

Question 2

what price will firms set using the assumptions of perfect competition