Perfect Competition Flashcards
1
Q
What are the features of perfect competition?
A
Many small firms Homogenous goods All firms are price takers Perfect knowledge Freedom of entry and exit Larger number of buyers and sellers Factors of production are completely mobile
2
Q
Do firms in perfect competition have SNP?
A
No-The cancel out effect
3
Q
Is there productive efficiency in perfect competition?
A
Yes-Operating at the lowest point of the AC Curve
4
Q
Is there allocative efficiency in perfect competition?
A
Yes-Price is = to MC
5
Q
Is there dynamic efficiency in perfect competition?
A
No-There is the incentive but not the means as there is no SNP
6
Q
Define price taker
A
When a firm accepts prices as they do not have enough market share to effect prices
