Perfectly Competitive Market
Definition
A perfectly competitive market is a market structure where there are many buyers and sellers, all selling identical products, and no single buyer or seller has the power to influence the price.
Analogy
Imagine a farmer's market with multiple vendors selling the same type of apples. Each vendor has no control over the price of apples because there are so many other vendors selling them too.
Related terms
Monopoly: A monopoly is a market structure where there is only one seller who controls the entire market for a particular product or service.
Oligopoly: An oligopoly is a market structure where there are only a few large firms that dominate the industry and have significant control over prices.
Market Equilibrium: Market equilibrium occurs when the quantity demanded by buyers equals the quantity supplied by sellers, resulting in an agreed-upon price.
"Perfectly Competitive Market" appears in:
Study guides (2)
Practice Questions (8)
In a perfectly competitive market, what does it mean for a firm to exit the market?
What happens to a firm's producer surplus when the price is less than the variable cost in a perfectly competitive market?
How does the market price change when firms enter the market in a perfectly competitive market?
In the long run, what happens to profits in a perfectly competitive market?
What determines the price in a perfectly competitive market?
In a perfectly competitive market, what happens to the price when firms exit the market?
A firm in a perfectly competitive market is currently experiencing losses in the short run. Which of the following best explains why the firm may continue to operate rather than shutting down?
Which of the following scenarios is most likely to lead to the exit of firms from a perfectly competitive market?
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