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

Real price and how to calculate real prices?, REAL VERSUS NOMINAL PRICES ...

REAL VERSUS NOMINAL PRICES • Nominal price is a complete or current dollar price of a good or service when it is sold. • Real price is the price related to a combined me

Consumer Behavior, Ask questioThe difference between the present value of c...

Ask questioThe difference between the present value of cash inflows and the present value of cash outflows over a period of time is termed as Net Present Value. This is used for th

Parameters for assessing economic reforms, PARAMETERS FOR ASSESSING ECONOMI...

PARAMETERS FOR ASSESSING ECONOMIC REFORMS: Let it be clearly understood that liberalisation, privatisation and globalisation are means with the help of which the growth proces

Natural factors and availability of credit, Natural Factors: Seasonal va...

Natural Factors: Seasonal variations may affect the demand for a commodity at certain times of the year. For example, during the raining season, demand for commodities such as j

Macroeconomics, A government is currently operating with an annual budget d...

A government is currently operating with an annual budget deficit of $40 billion. The government has determined that: • Every $10 billion reduction in the amount of bonds it issue

When does deadweight loss occur to society, When does deadweight loss occur...

When does deadweight loss occur to society? Applying consumer and producer surplus the efficiency costs of a tax: A tax causes a deadweight loss to society, since less the g

Interest rate dertemination, to what extent are interest rates determined b...

to what extent are interest rates determined by the economic theory

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