Perfect competition
Definition. Perfect competition is a market structure with many small firms selling a homogeneous product, where there is perfect knowledge, no barriers to entry or exit, and each firm is a price taker. Because no single firm can influence the market price, each faces a perfectly elastic demand curve at the ruling price.
In the long run, free entry and exit drive firms to earn only normal profit, and the market achieves both productive and allocative efficiency, making it a theoretical benchmark for comparison.
This term belongs to Perfect Competition in A Level Economics. Read the full chapter for the diagrams, worked examples and exam technique.
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