Perfect Competition
Definition
Perfect competition describes an idealized market structure where there are many buyers and sellers who have perfect information about prices and products. In this type of market, no single buyer or seller has the power to influence prices.
Related terms
Price Taker: In perfect competition, firms are price takers because they have no control over the market price and must accept it as given.
Homogeneous Products: Homogeneous products are identical goods or services that cannot be differentiated by consumers based on brand or quality.
Market Entry and Exit: Perfectly competitive markets allow for easy entry and exit of firms, meaning new businesses can enter if they see potential profits, while existing firms can exit if they face losses.
"Perfect Competition" appears in:
Study guides (2)
AP Microeconomics - 5.3 Perfectly Competitive Labor Markets
AP Microeconomics - 6.5 Inequality
Additional resources (2)
AP Microeconomics - 2024 AP Microeconomics Exam Guide
AP Microeconomics - Introduction to Unit 3
Practice Questions (8)
Which of the following best describes the control over price in perfect competition?
In perfect competition, the products sold are?
In perfect competition, individual firms are?
Which of the following is a characteristic of perfect competition?
Which of the following is true about profit in the long run of perfect competition?
Which of the following is not a characteristic of perfect competition?
In perfect competition, which factor(s) might lead to a firm earning short-term economic profits?
Which of the following statements best explains the relationship between perfect competition and innovation?
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About Us
About Fiveable
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Careers
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Terms of Use
Privacy Policy
CCPA Privacy Policy
Resources
Cram Mode
AP Score Calculators
Study Guides
Practice Quizzes
Glossary
Cram Events
Merch Shop
Crisis Text Line
Help Center
© 2024 Fiveable Inc. All rights reserved.
AP® and SAT® are trademarks registered by the College Board, which is not affiliated with, and does not endorse this website.