(BQ) Part 2 book "Essential foundations of economics" has contents: Perfect competition, monopolistic competition and oligopoly, jobs and unemployment, potential GDP and the economic growth, money and the monetary system, aggregate supply and aggregate demand, fiscal policy and monetary policy. | Find more at Why did GM fail? Perfect Competition When you have completed your study of this chapter, you will be able to 11 CHAPTER CHECKLIST 1 Explain a perfectly competitive firm’s profit-maximizing choices and derive its supply curve. 2 Explain how output, price, and profit are determined in the short run. 3 Explain how output, price, and profit are determined in the long run and explain why perfect competition is efficient. 277 Find more at 278 Part 3 • PRICES, PROFITS, AND INDUSTRY PERFORMANCE MARKET TYPES The four market types are • • • • Perfect competition Monopoly Monopolistic competition Oligopoly Perfect Competition Perfect competition A market in which there are many firms, each selling an identical product; many buyers; no barriers to the entry of new firms into the industry; no advantage to established firms; and buyers and sellers are well informed about prices. Perfect competition exists when • • • • Many firms sell an identical product to many buyers. There are no barriers to entry into (or exit from) the market. Established firms have no advantage over new firms. Sellers and buyers are well informed about prices. These conditions that define perfect competition arise when the market demand for the product is large relative to the output of a single producer. This situation arises when economies of scale are absent so the efficient scale of each firm is small. But a large market and the absence of economies of scale are not sufficient to create perfect competition. In addition, each firm must produce a good or service that has no characteristics that are unique to that firm so that consumers don’t care from which firm they buy. Firms in perfect competition all look the same to the buyer. Wheat farming, fishing, wood pulping and paper milling, the manufacture of paper cups and plastic shopping bags, lawn service, dry cleaning, and the provision of laundry services are all examples of highly competitive .
