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 ▸Explain how a change in Government spending may affect the average price level and real GDP
Assess the likely macroeconomic effects of an increase in house prices on the UK economy
What is the difference between perfect competition and imperfect competition?
What is the difference between absolute and comparative advantage?