Economics Perfectly Competitive Market Structure

1642 words 7 pages
draw a diagram of a perfectly competitive firm earning a positive economic profit assume the wages, which the firm pays to its workers, falls. Illustrate the impact of such an event on the price, output and profits of this firm

2. Examine the following statement to see whether it is true or false. If it is true, explain why it is true. If it is false, explain why it is false and then write the statement correctly.
A profit maximising perfectly competitive firm should select the output level at which the difference between the marginal revenue and marginal cost is greatest. This is equivalent to selecting the output where the spread between total revenue and total cost is greatest.

In the short-run, it is possible for an
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Technically the SR supply curve is a discontinuous function composed of the segment of the MC curve at and above minimum of the average variable cost curve and a segment that runs with the vertical axis from the origin to but not including a point "parallel" to minimum average variable costs.[27]
[edit]Examples
Perhaps the closest thing to a perfectly competitive market would be a large auction of identical goods with all potential buyers and sellers present. By design, a stock exchangeresembles this, not as a complete description (for no markets may satisfy all requirements of the model) but as an approximation. The flaw in considering the stock exchange as an example of Perfect Competition is the fact that large institutional investors (e.g. investment banks) may solely influence the market price. This, of course, violates the condition that "no one seller can influence market price".
Free software works along lines that approximate perfect competition. Anyone is free to enter and leave the market at no cost. All code is freely accessible and modifiable, and individuals are free to behave independently. Free software may be bought or sold at whatever price that the market may allow.
Some believe[who?] that one of the prime examples of a perfectly competitive market anywhere in the world is street food in developing countries. This is so since relatively few barriers to entry/exit exist for street vendors. Furthermore, there are often numerous buyers

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