Question

Define perfect competition.

Hint:

Perfect competition is an ideal market where everyone sells the exact same thing and no one has any power over the price.

Answer 1

Perfect competition is a market structure characterized by a large number of buyers and sellers, all of whom are price-takers. Key features include:

Homogeneous Products: All firms sell an identical product.
Large Number of Buyers and Sellers: No single buyer or seller can influence the market price.
Free Entry and Exit: Firms can easily enter or leave the market.
Perfect Information: All participants have complete information about prices and products.
In perfect competition, the demand curve for an individual firm is perfectly elastic (a horizontal line).