108139
Description
Mind Map by cdsmith123, updated more than 1 year ago
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Created by cdsmith123
over 11 years ago
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Perfect Competition
- ASSUMPTIONS
- LARGE NUMBER OF BUYERS+SELLERS - NO
INDIVIDUAL CAN ALTER THE
MARKET PRICE
- PERFECT INFORMATION OF ALL
PRODUCTS
- EQUAL ACCESS TO TECHNOLOGY
- HOMOGENEOUS PRODUCTS
- NO BARRIERS TO ENTRY OR EXIT
- PERFECTLY MOBILE FACTORS OF PRODUCTION
- LARGE NUMBER OF BUYERS+SELLERS - NO
INDIVIDUAL CAN ALTER THE
MARKET PRICE
- LONG RUN = profits cannot be made
- firm would be competed away
- produce at market clearing price
- ATC=MC
- ATC=MC
- produce at market clearing price
- firm would be competed away
- SHORT RUN = If ATC is below market clearing price
- Abnormal profits made
- signals to other firms to enter market
- supply increase = price set below market clearing = ATC=MC
- supply increase = price set below market clearing = ATC=MC
- signals to other firms to enter market
- Abnormal profits made
- LONG RUN = firms statically efficient
- both productively + allocatively efficient at the
same time
- Firms being making losses
- supply reduces
- price increases
- price increases
- supply reduces
- Firms being making losses
- both productively + allocatively efficient at the
same time
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