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Eco Economics

EconomicsNEB 2075 (old course)

Write any four features of perfect competitive market. [2]

2

Answer

· Based on the official syllabus and past papers
Updated

A perfectly competitive market exhibits the following four key features:

  1. Large Number of Buyers and Sellers Both buyers and sellers are so numerous that no single entity can influence the market price. Each acts as a price taker, accepting the prevailing market price.

  2. Homogeneous Products All firms produce identical goods or services with no differences in quality, features, or branding. Consumers view products from different sellers as perfect substitutes.

  3. Free Entry and Exit Firms can enter or exit the market without legal restrictions or significant barriers (e.g., high start-up costs). This ensures long-run equilibrium where economic profits are zero.

  4. Perfect Knowledge All market participants have complete information about prices, product quality, and market conditions. No buyer or seller faces uncertainty or asymmetric information.

Quantity (Q)Price (P)OPrice (P) = MR = AREquilibriumQP
In perfect competition, Price = Marginal Revenue = Average Revenue (horizontal line at P)

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