A Perfectly Competitive Market Is a Market in Which Economic

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1. In a perfectly competitive industry both buyers and sellers are price takers. Price takers are firms or individuals who take the price determined by the market equilibrium as given. In a perfectly competitive market, market supply and demand determine the price; both firms and consumers take the price as given.
2. A large number of firms in this context means that there are so many firms that any one firm's output compared to market output is imperceptible, and what one firm does has no influence on what other firms do.
3. There are no barriers to entry. Barriers to entry may be social, political or economic impediments that prevent firms from entering a market. In a perfectly competitive industry, there could be no patents, and the minimum efficient scale should allow a large number of firms to produce at the lowest average cost.
4. Each firm's output is indistinguishable from any other firm's output. Corn sold on national grain markets would be an example. The price of all bushels would be the same. Pepsi and Coke are examples of products that are not identical. They may sell at different prices in the market and the market for colas and therefore cannot be regarded as perfectly competitive.
5. In a perfectly competitive market, firms and consumers know all there is to know about the market. This would include prices, products and available technology. Thus no firm or consumer would have a competitive edge over another.
6. For perfect competition to exist, firms must seek maximum profit and only profit, and the people who make the firm's decisions must receive profit and only profit.

A Perfectly Competitive Market Is a Market in Which Economic

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