Perfect competition
Perfect competition is a market structure characterised by: many firms, identical products, perfect information, no barriers to entry or exit, and price-taking behaviour. Each firm is too small to influence the market price and accepts the price set by supply and demand.
Real World
Agricultural commodity markets like wheat trading on the Chicago Mercantile Exchange closely approximate perfect competition — thousands of farmers sell identical grain at a price set entirely by global supply and demand, with no single farmer able to influence the price.
Exam Focus
When 'evaluate' perfect competition, always contrast short-run supernormal profit with long-run normal profit to show dynamic adjustment.
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