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Project On Perfect Competition

This document presents information on perfect competition. It defines perfect competition as a market structure with many small firms, homogeneous products, free entry and exit, and perfect information. The key assumptions of perfect competition are outlined, including many buyers and sellers, price-taking behavior, identical and substitutable products, equal access to resources, and no barriers to entry or externalities. Graphs are used to illustrate profit maximization under perfect competition by comparing price, marginal cost, average total cost, and marginal revenue. The conclusion restates the defining characteristics of a perfectly competitive market.

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Sandeep Nagpal
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772 views

Project On Perfect Competition

This document presents information on perfect competition. It defines perfect competition as a market structure with many small firms, homogeneous products, free entry and exit, and perfect information. The key assumptions of perfect competition are outlined, including many buyers and sellers, price-taking behavior, identical and substitutable products, equal access to resources, and no barriers to entry or externalities. Graphs are used to illustrate profit maximization under perfect competition by comparing price, marginal cost, average total cost, and marginal revenue. The conclusion restates the defining characteristics of a perfectly competitive market.

Uploaded by

Sandeep Nagpal
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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PROJECT ON PERFECT

COMPETITION
Presented By –
Aditi Khot
Murtuza Hasan
Sandeep Nagpal
Manish Telavane
Payal Vadgama
TYPES OF MARKET STRUCTURE
 Monopoly
 Oligopoly
 Dominant Firm
 Monopolistic Competition
 Perfect Competition
PERFECT COMPETITION
 The concept of competition is used in two
ways in economics.
 Competition as a process is a rivalry among
firms.
 Competition as the perfectly competitive market
structure.
A PERFECTLY COMPETITIVE
MARKET •A perfectly competitive
market is one in which
economic forces operate
unimpeded.

•Many firms, all making


the same product. Each
firm’s output level is very
small relative to the total
output level.
ASSUMPTIONS:
 There are many buyers and sellers,
each firm is a price-taker.
 Identical output produced by each firm –
homogeneous products that are perfect substitutes
for each other.
 All firms (industry participants and new entrants)
have equal access to resources (e.g. technology)
 No barriers to entry & exit of firms in long run – the
market is open to competition from new suppliers.
 No externalities in production and consumption
Hypothesis:

Each Seller is Perfect Competitor and Each Buyer is the King.


LINKING ROAD -
MANY BUYERS AND MANY SELLERS
LINKING ROAD – IDENTICAL PRODUCTS
AND PERFECT SUBSTITUTES
DETERMINING PROFITS
GRAPHICALLY
Price MC Price MC Price MC
65 65 65
60 60 60
55 55 55
50 50 50 ATC
45 45 ATC 45
40 D A P = MR 40 40 Loss P = MR
35 35 35
30 Profit 30
P = MR 30
B ATC AVC
25 C AVC 25 AVC 25
20 E 20 20
15 15 15
10 10 10
5 5 5
0 0 0
1 2 3 4 5 6 7 8 9 1012 1 2 3 4 5 6 7 8 9 1012 1 2 3 4 65 7 8 910 12
Quantity Quantity Quantity
(a) Profit case (b) Zero profit case (c) Loss case
THE SHUTDOWN DECISION

MC
Price
60

50 ATC

40 Loss
P = MR
30
AVC
20
$17.80 A
10

0
2 4 6 8 Quantity
CONCLUSION
Price-takers market.

Homogeneous products that are perfect substitutes?

All firms have equal access to resources


(e.g.technology)

Free entry & exit of firms

No externalities in production and consumption

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