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 ▸State and explain two ways in which domestic fuel consumption gives rise to negative externalities.
What are barriers to entry?
Explain how petrol and diesel cars may be a source of market failure?
When would a reduction in the base rate of interest by the MPC be appropriate, and why?