Question

Principles of Microeconomics:

1. Pick one or more of the textbook chapters and research a current topic related to the chapter(s). Topic= Perfect competition
2. Pick a public corporation or organization, and describe the business using the concepts learned in the course such as demand, supply, elasticity, costs, market structure...
3. Pick a product and define the demand and supply determinants for that product. Also explain the product´s elasticity, cost structure, market, and competition.

2. The grade will depend on how much you apply the concepts learned in the course and shown in the text-book

3. Main body of the paper should be between 4 to 6 pages depending of the number of section used.

Answer 1

the solution provided in the next section has key points for writing a paper on perfect competition.

Perfect Competition:

Homogenous product: products are homogenous in nature that means all products are identical and there is no product differentiation.

Perfect knowledge: Both producers and consumers have perfect knowledge about the product and prices in the market.

These two basic properties of perfect competition lead to price-taking firms. the prices are given by a particular industry. Due to large numbers of buyers and sellers in the market, one single buyer or producer can not influence the price of the commodity.

Free exit and entry of the firms: in the perfect competition market, firms are allowed to enter and exit the market freely. This leads to zero economic profit for the firms. If the firms are earning supernormal profit then more firms will enter the market which further leads to a fall in prices of the commodity. More firms will enter the market until Price equals Marginal Cost. Similarly, if firms are occurring losses then some firms will exit the market which will lead to increased price and further leads to P=MC.

Perfect competition is considered ideal form of the market as large numbers producers and consumers compete with each other with symmetric information.

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