Characteristics of Perfect Competition quiz #2 Flashcards
Characteristics of Perfect Competition quiz #2
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Perfect competition is characterized by all of the following except... Barriers to entry are not a characteristic of perfect competition. An example of a perfectly competitive market would be the... The wheat market is an example of a perfectly competitive market. The representative firm in a purely competitive industry... Faces a perfectly elastic demand curve and is a price taker. Identical products, as well as a large number of buyers and sellers, are characteristics of a... Perfectly competitive market. In a perfectly competitive industry, each firm... Is a price taker and cannot influence the market price. What does free entry and exit mean in the context of perfect competition? Free entry and exit means firms can join or leave the market without significant barriers, allowing anyone to start or stop producing the good at any time. How does the equilibrium price in a perfectly competitive market get determined? The equilibrium price is set at the intersection of the market's downward-sloping demand curve and upward-sloping supply curve, reflecting the price at which quantity demanded equals quantity supplied. Why can't an individual firm in a perfectly competitive market influence the market price? An individual firm cannot influence the market price because there are so many buyers and sellers that each firm's output is a tiny fraction of the total market, making them price takers. What happens if a firm in a perfectly competitive market tries to charge more than the market price? If a firm charges even slightly more than the market price, it will not sell any of its product because buyers can purchase identical goods from other sellers at the market price. How does the demand curve faced by an individual firm in perfect competition differ from the market demand curve? The individual firm's demand curve is perfectly elastic and horizontal at the market price, while the market demand curve is downward sloping.
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