Explain the assumptions behind perfect competition and how firms behave under this market structure.
Perfect competition assumes that everyone has perfect information (no asymmetries). In addition, under perfect competition, there are many firms selling a homogeneous product. No one firm can have an effect on price, thereby implying that each supplier is a price taker (rather than a price setter). Price is set at marginal cost.
TR
Related Economics A Level answers
All answers ▸Why do some argue that there is a trade off between unemployment and inflation?
What happens to the Production Possibility Frontier (PPF) when productivity only increases in one good?
If the Marginal Social Cost of Producing a good is higher than the marginal private cost -what has happened?
Explain the 2 ways in which a reduction in interest rates can change consumption in the aggregate demand model of the economy.