Perfect competition

Question 1

Characteristics

perfect comp

Answer 1

• homogenous goods
• little to no barriers to entry
• firms are price takers
• perfect knowledge
• many buyers and sellers
• low market share
• no externalaties

Question 2

SR perfect comp

Answer 2

• snp
• dynamic efficency

Question 3

LR perfect comp

Answer 3

• normal profits
• allocative efficency
• productive efficency

Question 4

ADV perfect comp

Answer 4

• consumers have high bargaining power and little to no chances of being exploited ( can switch to another place)
• allocative efficency
• productive efficency
• lower advertisement cost

Question 5

Disadvantages perfect comp

Answer 5

• Buyers have diffrent tastes and preferences ( buyers utility is not optimised)
• dynamic effiency can not occur as there are little/no profits
• Little to no innovation