Market Structure: Perfect Competition;
THE FOLLOWING NOTES ARE THE BASIC CONCEPTS IN THE MAINSTREAM (CAPITALISTIC, NEO-CLASSICAL) ECONOMICS.
- Large number of sellers and buyers
- Homogeneous products
- Freedom of entry into exit from the market
- Suppliers are price takers
- Price (P) = Marginal Revenue (MR)
- Extra revenue of an additional unit is the same as the current price
- Long-run Equilibrium
- Companies earn normal profits
- P = MR = MC = AC
- The perfectly competitive market will be allocatively / productively efficient.
- Companies produce products at the minimum of Average Costs (AC) curve – lowest unit cost possible – and there is no waste of resources.