Question

What can be wrong about a perfectly competitive equilibrium?

What can be wrong about a perfectly competitive equilibrium?

Homework Answers

Answer #1

Perfect competition market is a market where competition is at the highest level. Everyone has perfect knowledge about the product. The product is homogeneous and there are free entry and exit.

(1). In a perfectly competitive market, there is no competition over there.
(2). No one can influence the price of any commodity.
(3). As there is no competition so there is no advertisement over there.
(4). Price is determined by an impersonal force which has no control of household and firms.
(5). At equilibrium, all buyers and sellers are dealing with those prices which they can do.
(6).There is free entry and exist so a new firm is attached to those firm which has supernormal profit and as a result profit is down to normal.
(7). This framework has no self-independence, no self-decision.
(8). Everyone charges the same price so there is P=MC and it follows by every firm so that society pays for the last unit of output.
(9). In this market there is homogeneous production there is no variety product in this market.

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