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Perfect Competition (Assumptions (Perfect knowledge, Barriers to entry,…
Perfect Competition
Assumptions
Perfect knowledge
Barriers to entry
Profit maximisation
Many Buyers/Sellers
No collusion
Homogenous products
Short -run
SNP's
Inefficient
Price and Quantity/Output
Costs
1/2 Page Diagram
Long-Run
NP
Efficient
Price and Quantity/Output
Cost
1/2 Page Diagram
Advantages
Low prices
Efficient
No advertising
NP
Disadvantages
No EOS
Little choice
No R&D
No incentive to develop new technology
Price - Taker
Interaction between D & S
Perfectly Elastic
Short - Run Supply Curve
MC curve above AVC
Long-run Suppy Curve
MC curve above AC