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 ▸Should the government intervene in cases of market failure
What is elasticity of demand and how do you work it out?
Explain how price and output are determined for a firm in a monopolistically competitive market, in both the short run and the long run
Evaluate the extent to which policies to increase economic growth may conflict with the objectives of other policies (20)