Perfectly competitive market, Microeconomics

Assignment Help:

Perfectly Competitive Markets

* Characteristics of Perfectly Competitive Markets

 1. Price taking

 2. Product homogeneity

 3. Free entry and exit

* Price Taking

- The individual firm sells a small share of total market output and, thus, cannot influence the market price.

- The individual consumer buys too small share of industry output to have any impact on market price.

* Product Homogeneity

- The products of all the firms are perfect substitutes.

- Examples

  • Agricultural products, copper, oil, iron, lumber

* Free Entry and Exit

- Buyers can switch easily from one supplier to another.

- Suppliers can enter easily or exit a market.

- Possibility of other objectives

1) Revenue maximization

2) Dividend maximization

4) Short-run profit maximization

- Implications of nonprofit objective

  • Over long run investors would not support company
  • Without profits, survival unlikely

- Long run profit maximization is valid and does not exclude possibility of altruistic behavior. 


Related Discussions:- Perfectly competitive market

Axioms - revealed preference theory, Axioms: Revealed preference theor...

Axioms: Revealed preference theory is based on the axioms listed below.  •  Consumer will spend all her income on goods. The consumer equilibrium always remains on the budg

PERFECT COMPETITION and THE SUPPLY CURVE & MONOPOLY, Joe Brown’s dairy oper...

Joe Brown’s dairy operates in a perfectly competitive marketplace. Joe’s machinery costs $500 per day and is the only fixed input. His variable costs are comprised of the wages pai

Egyptian Labor Market.., How to use Demand and Supply tools to analyze the ...

How to use Demand and Supply tools to analyze the case of the Egyptian labor market?

Income elasticity of demand, what are the practical importance of income el...

what are the practical importance of income elasticity of demand?

Bayesian Nash Equilibrium, Consider 2 firms i=1,2 producing quantities q1 a...

Consider 2 firms i=1,2 producing quantities q1 and q2 respectively. Let the market price be given by P=a-b(q1+q2). Firm 1''s Marginal cost c is common knowledge but 2''s cost is no

1, what is market equilibrium and disequilibrium?

what is market equilibrium and disequilibrium?

A significant majority of consumers, Normal 0 false false f...

Normal 0 false false false EN-IN X-NONE X-NONE MicrosoftInternetExplorer4 The demand schedule c

Welfare economics, Prove the theory of second best with the help of a diagr...

Prove the theory of second best with the help of a diagram

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd