Unit 2.11 · Market Failure: Market Power
Perfect Competition
AO2AO3AO4HLDiagram required
Syllabus Requirement
Many firms, free entry, homogeneous products. Firm is a price taker. Short-run and long-run outcomes under profit maximization.
Assessment Objectives
AO2Application and Analysis
AO3Synthesis and Evaluation
AO4Use of Appropriate Skills
Summary
Perfect competition is a theoretical market structure that serves as a standard for evaluating real markets. It is characterized by many small firms, homogeneous products, and conditions that prevent any single firm from influencing market prices. Understanding this model is important for analyzing market efficiency and the effects of market power.