Perfect Competition Flashcards
1
Q
Perfect Competition
A
A market or industry where there is a large number of firms competing with each other by producing and selling identical product.
2
Q
Characteristics of Perfect Competition
A
Many Small firms
No barriers to entry
Firms are Price takers
No market Power
3
Q
What happens to the supply curve in perfect competition
A
supply curve shifts to the right, lowering the price (because of the many firms)
4
Q
Examples of Perfect Competition
A
corn, rice, and milk
5
Q
Do Perfect Competition firms participate in price discrimination
A
No, there is no consumer surplus to capture
6
Q
Why do they not participate?
A
The MR curve is perfectly horizontal
7
Q
Is there market power within perfect competition?
A
There is no market power because the firms are price takers
