What are the characteristics of a perfectly competitive market? Provide an original (not from text or...
- What are the characteristics of a perfectly competitive market? Provide an original (not from text or notes) of a market that you think has these characteristics (and explain why you think this). a. Why are marginal revenue and price equal for a firm operating in a perfectly competitive market?
Homework Answers
Characteristics of perfect
market:
1. More number of sellers who sells same good
2. Producers don’t have the pricing power and price gets determined
based on demand and supply forces
3. Price = MC=MR
4. Firms can easily enter and exit from the market
Because of increased competition, producers are forced to reduce
price to a point where price equals the marginal cost of producing
a good. If not, the producers would loss the business leading to
losses
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What are the characteristics of a perfectly competitive market?
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