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Perfect Competition (Characteristics (Many buyers and sellers (Large…

- - - - Yes as P=MC
    - - No
  - - - YES
    - - NO
- - - - Can earn supernormal, normal and subnormal profits
    - - Supernormal Profits--> ENTRY of new firms
        
        Due to low BTE, the supernormal profits enjoyed by existing firms will attract new firms to enter the industry. Hence the supernormal profits are competed away until all firms are just making normal profits
      - Subnormal Profits--> EXIT of new firms
        
        If exiting firms experience subnormal profits in the long run, some firms will shut down and exit the industry. The size of industry shrinks until each firm starts making normal profits as each firm is now producing a higher eqm Q
  - - - None because will lead to fall in profits
    - - Product Differentiation:
        
        Nope, Complete information: rivals would merely copy them
      - Innovation
        
        Nope, for innovation must have incentive and ability. Little incentive to carry out R&D as rivals would merely copy. Little ability as all PC firms only enjoy normal profits