What are the conditions of perfect competition?
We define a perfectly competitive market as a market which fulfils the six following conditions: 1) Large number of sellers and buyers. 2) Homogenous product: All of the goods sold within the market are identical. In other words, there is no product differentiation. 3) Free entry and exit: Firms are free to enter and exit the market as there are no entry or exit barriers. 4) Perfect information: Every individual and every firm within the market possesses perfect information, meaning that there is absolutely no uncertainty within the market. 5) Cheap and efficient transportation. 6) No government controls.A truly perfectly competitive market will never exist. All markets experience degrees of product differentiation, and all markets have barriers to entry and asymmetric information. As such, we use perfect competition as a benchmark to assess the degree of competition within a market.
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