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Perfect Competition and Long-run Equilibrium - Term Paper Example

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This paper "Perfect Competition and Long-run Equilibrium" aims to explain perfect competition in detail and the effects of such a market in the long run. It also explains the conditions that cause marginal social benefits to be equal to the marginal social costs…
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Perfect Competition and Long-run Equilibrium
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Download file to see previous pages Basically, in a market of perfect competition does not give monopoly to a single company. A single firm or company does not rule over the whole market as many firms are producing the same products. Thus one single firm is not able to determine the prices of products. A market with perfect competition would have many suppliers, producers and consumers because of the different firms involved in such a market. The perfect competition involves many sellers or firms and thus it cannot be found to be very common in this world. In perfect competition it is not difficult for the new firms to enter, thus it is seen that many sellers are involved in this type of competition. The reason for this is that the firms do not have to have a huge capital to enter this competition and they can seek help from many individuals when entering in this sector. Moreover not only is it easy to enter the perfectly competitive market but also it is easy to exit such a market. The transactions which are made in this type of competition do not cost anything to the buyers or sellers. In such a type of competition, it is aimed that the firms maximize their profits by selling their products where the marginal costs and marginal revenue are in equilibrium. The most important characteristic of such a competition is that the products which are being sold are usually manufactured by many companies thus strong competition is felt in this type of competition. An example of perfect competition is a group of fruit vendors who are selling the same fruits. ...Download file to see next pagesRead More
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