Quote: "a perfect market, also known as an atomistic market, is defined by several idealizing conditions, collectively called perfect competition, or atomistic competition."
A market structure in which a large number of small firms compete in a market, with no firm having the ability to influence prices or output.
Market Structure: A general overview of different types of market structures, including perfect competition, monopolistic competition, oligopoly, and monopoly.
Assumptions of Perfect Competition: The assumptions made in order for a market to be considered perfectly competitive, including a large number of buyers and sellers, homogenous goods, and ease of entry and exit.
Market Equilibrium: Understanding how supply and demand interact in a perfectly competitive market to determine the equilibrium price and quantity.
Price Elasticity of Demand: The responsiveness of buyers to price changes, and how it affects the demand for a good or service.
Marginal Revenue and Marginal Cost: The concepts of marginal revenue and marginal cost, and how they affect the profit-maximizing behavior of firms in a perfectly competitive market.
Short-Run and Long-Run Firm Behavior: How firms in a perfectly competitive market behave in the short-run and long-run, including the role of fixed and variable costs in determining their behavior.
Profit Maximization: The goal of firms in a perfectly competitive market, and how they use the concepts of marginal revenue and marginal cost to maximize their profits.
Entry and Exit: Understanding how the ease of entry and exit affects the number of firms in a perfectly competitive market, and how it affects the equilibrium price.
Efficiency: The concept of efficiency in a market, and how it is achieved in a perfectly competitive market.
Consumer and Producer Surplus: A measure of the welfare gained by consumers and producers in a market, and how it is affected by changes in the equilibrium price.
Monopoly Power: The ability of a firm to influence the market price, and how it affects the behavior of firms in a perfectly competitive market.
Market Failures: Understanding the situations where market failures occur, and how policies can be used to correct them in a perfectly competitive market.
Quote: "it has been demonstrated that a market will reach an equilibrium in which the quantity supplied for every product or service, including labor, equals the quantity demanded at the current price."
Quote: "Such markets are allocatively efficient, as output will always occur where marginal cost is equal to average revenue i.e. price (MC = AR)."
Quote: "In perfect competition, any profit-maximizing producer faces a market price equal to its marginal cost (P = MC)."
Quote: "This is also the reason why a monopoly does not have a supply curve."
Quote: "In the short-run, perfectly competitive markets are not necessarily productively efficient, as output will not always occur where marginal cost is equal to average cost (MC = AC)."
Quote: "However, in the long-run, productive efficiency occurs as new firms enter the industry. Competition reduces price and cost to the minimum of the long run average costs."
Quote: "Léon Walras gave the first rigorous definition of perfect competition and derived some of its main results."
Quote: "Imperfect competition was a theory created to explain the more realistic kind of market interaction that lies in between perfect competition and a monopoly."
Quote: "Edward Chamberlin wrote 'Monopolistic Competition' in 1933...analyzed firms that do not produce identical goods, but goods that are close substitutes for one another."
Quote: "The act of price discrimination under imperfect competition implies that the seller would sell their goods at different prices depending on the characteristic of the buyer to increase revenue."
Quote: "Joan Robinson, who published her book 'The Economics of Perfect Competition'...focused heavily on price formation and discrimination."
Quote: "Real markets are never perfect."
Quote: "Those economists who believe in perfect competition as a useful approximation to real markets may classify those as ranging from close-to-perfect to very imperfect."
Quote: "The real estate market is an example of a very imperfect market."
Quote: "In such markets, the theory of the second best proves that if one optimality condition in an economic model cannot be satisfied, it is possible that the next-best solution involves changing other variables away from the values that would otherwise be optimal."
Quote: "This equilibrium would be a Pareto optimum."
Quote: "It allows for derivation of the supply curve on which the neoclassical approach is based."
Quote: "However, in the long-run, productive efficiency occurs as new firms enter the industry."
Quote: "both were extremely helpful in allowing firms to understand better how to center their goods around the wants of the consumer to achieve the highest amount of revenue possible."