Perfect competition Flashcards
What is perfect competition?
Both buyers and sellers believe their own actions have no effect on the market price.
How many sellers in a perfectly competitive market?
Many. Goods like cabbages, carrots.
Why are firms price takers?
As the market determines the price.
What are the factors of perfect competition?
Freedom to enter/ exit, perfect knowledge, whats available.
What is the fixed factor in the short term?
Quantity
What can vary in the long run?
Quantity, labour, land, capital. Can lead to new inputs, factory or even a new product.
What are important factors of marginal costs?
Cost of an additional unit increases as production. Average fixed costs fall when there are economies of scale and rise when diseconomies of scale.
What is supernormal profits?
The profits generated for firms by taking the market price, but the costs are lower. Soon increases as other firms entering decreasing costs.
How is normal costs created?
By other firms entering the market which means that the profits lower and just lead to normal profits.
What are markets classified by?
competition - no.firms, freedom of entry, nature of demand curve.
What are the features of monopolistic competition?
Many firms, unrestricted, different products, builders, restaurants, downward sloping.
Features of Oliography
Few businesses, restricted, un/differentiated, cement, cars, downward sloping.
Define features of Monopoly
One, restricted. local water companies, trains. Downward sloping/ inelastic.
Q: Does perfect competition explain the house building industry? DEFINE WHAT WILL BE IN THE PLAN.
- Intro -What is PC -Model on assumptions -How does PC work -Entry -Problematic -Price setting -Monopolistic competition -Conclusion
