Okuzeka
Economics vocabulary · Markets, Supply and Demand

Perfect competition

Meaning in economics, with examples

nounCommon term

In economics, perfect competition means: A theoretical market with many small sellers of an identical product, free entry and exit, and full information, so that no single firm can set the price.

In Turkish: tam rekabet

How it is used

A benchmark model in microeconomics: firms are price takers and earn zero economic profit in the long run. Real markets rarely meet every condition, but some farm and commodity markets come close. Textbooks compare it with monopoly, oligopoly and monopolistic competition.

Example sentences

  1. Under perfect competition, price equals marginal cost in the long run.

  2. The wheat market is often used as an example of something close to perfect competition.

Common collocations

  • perfectly competitive market
  • under perfect competition
  • model of perfect competition
  • price taker
  • competitionRivalry between firms that sell similar products and try to win the same customers, which tends to push prices down and quality up.
  • monopolyA market in which a single firm is the only seller of a product with no close substitutes, which gives it the power to set prices.
  • oligopolyA market controlled by a small number of large firms, so each firm's decisions on prices and output affect the others.
  • marginal costThe extra cost of producing one more unit of a good or service; a key idea when a firm decides how much to produce.
  • equilibriumA situation in which supply and demand are equal, so there is no pressure for the price or the quantity to change.

More terms: Markets, Supply and Demand

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