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 ▸Must I take Economics for my GCSES before A-levels? If not, will the catching up be difficult?
What is the "Tragedy of the Commons" and how may it be solved?
How can the Government increase aggregate demand
Why is the marginal return curve twice as steep as the average revenue curve in microeconomics firm theory?