Perfect Competition Flashcards
0
Q
Name 3 other features of perfect competition
A
Firms sell a homogenous product
No barriers to entry and exit
Buyers have perfet knowledge of prices
1
Q
How many buyers and sellers are there in the market?
A
A large number - no single seller is big enough to influence the selling price of goods or services
2
Q
What is a profit making firm’s profit in the lr and sr within a perfect competition market structure?
A
Sr Supernormal profit Lr Supply increases as new firms enter from attraction to snp and no barriers to entry This shifts so AR=AC
3
Q
Where is the shut down point of a loss making perfectly competitive firm?
A
When ar is less than average variable cost
Between atc and avc the firm can still try to pay back fixed costsin the short run
