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 ▸Evaluate the case for government provision of goods and services such as flood defence schemes.
Identify the characteristics of a monopolistically competitive market and explain why firms in this market are said to be inefficient.
What is meant by a monopoly?
What are the main tools to used to meet the key economic objective of ecomic growth?