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Conditions of a Perfectly Competitive Market

What four basic conditions characterize a competitive market? Please help with this. Thanks!

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Hello Student,

In order to answer this question, the first thing that you may want to do is define what perfect competition is; after which you can look at what the general characteristics of a perfectly competitive firm are.

Note the following excerpt:

"Perfect Competition is characterized by a large number of well-informed independent buyers and sellers who exchange identical products. It represents a theoretically ideal situation that is used to evaluate other market structures." (Source: Clayton, G. 2001. Economics, Principles and Practices. Glencoe, McGraw-Hill)

There are at least five conditions that characterize a perfectly competitive market or industry. These include:

1) Large Number of Firms - A perfectly competitive market or industry contains a large number of small firms, each of which is relatively small compared to the overall size of the market. This ensures that no single firm can exert market ...

Solution Summary

This solution fully characterizes a perfectly competitive firm. First, perfect competition is defined, and then the four conditions are listed and explained in detail in this approximately 629 word answer with references.