Question

In chapter 9 we learn about perfect competition. Why do you think we call it that? Who would perfect competition be perfect for? Explain fully... be sure to show your understanding of perfect competition in your answer.

Answer 1

perfect competition is called perfect because of its characterstics

A. N number of buyers and sellers

B. homogeneous goods

C. complete information about the price and product to buyer and seller

D. free entry and exit

E.everyone is the price taker

F. no one has the hold over the market. the market is controlled by demand and supply, and thus the output is efficient. all the buyers and sellers agree to buy at a fixed price .

G. no dead weight loss

perfect competitve market is perfect for both buyers and sellers as every seller sells it at the same price, the goods are homogeneous and thus there is no dead weight loss. the market is also perfect so buyers as they can buy it from anywhere at the same price without any discrimination.