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 ▸If mpc = 0.6, what will be the final change in National Income arising from an initial increase in Investment of £200m?
What is a simple definition of Keynes' sticky prices theory?
What is the difference between actual output and and potential output?
Explain how government policies can reduce the natural rate of unemployment