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2.11.1 Perfect competition

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If you are writing about perfect competition, make sure to point out all of the market structures' characteristics and how that causes the market structure to work as it does.

  1. Perfect competition is one extreme of the competition, where there is a very high level of competition.
  2. Perfect competition is the only market structure which:
    1. Normally does not have market failure
    2. Nuyers and sellers have perfect information of the market
    3. No government intervention
    4. No externalities
  3. Perfect competitions are rare in reality, because they have certain characteristics that are almost impossible to achieve in markets.
    1. Characteristics of perfect competition
      1. Large number of small firms
      2. Homogenous product: no product differentiation
      3. No barriers to entry and exit
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