Overview
Perfect competition is a market structure characterized by many firms selling identical products, where no single firm can influence the market price. This structure leads to efficient resource allocation, maximizing consumer and producer surplus. In perfect competition, firms are price takers, and ...
Key Terms
Example: Perfect competition is one type of market structure.
Example: In perfect competition, all firms are price takers.
Example: The equilibrium price is where the quantity supplied equals the quantity demanded.
Example: If a consumer is willing to pay $10 for a product but buys it for $7, their consumer surplus is $3.
Example: If a producer is willing to sell a product for $5 but sells it for $8, their producer surplus is $3.
Example: In the long run, firms in perfect competition earn normal profit.