Search results
Results from the WOW.Com Content Network
Perfect competition provides both allocative efficiency and productive efficiency: Such markets are allocatively efficient, as output will always occur where marginal cost is equal to average revenue i.e. price (MC = AR). In perfect competition, any profit-maximizing producer faces a market price equal to its marginal
In this diagram for example, firms are assumed to be in a perfectly competitive market. In a perfectly competitive market the price that firms are faced with in the long run would be the price at which the marginal cost curve cuts the average cost curve, since any price above or below that would result in entry to or exit from the industry ...
The market should adjust to clear any profits if there is perfect competition. In situations where there are non-zero profits, we should expect to see either some form of long run disequilibrium or non-competitive conditions, such as barriers to entry, where there is not perfect competition between firms. [5] [full citation needed]
Some labour markets have a single employer and thus do not satisfy the perfect competition assumption of the neoclassical model above. The model of a monopsonistic labour market gives a lower quantity of employment and a lower equilibrium wage rate than does the competitive model.
In perfectly competitive markets firms can "purchase" as many inputs as they need at the market rate. Because labor is the most important factor of production, this article will focus on the competitive labor market, although the analysis applies to all competitive factor markets. Labour markets are not quite the same as most other markets in ...
Perfectly competitive labour markets can still exhibit a wage compression effect. In a perfectly competitive market, workers of different skill levels receive different wages and workers of the same skill level will receive the same wage no matter which firm they work in.
In a perfectly competitive market, the return to a factor of production depends upon the value of its marginal productivity. The marginal productivity of a factor, like labor, in turn depends upon the amount of labor being used as well as the amount of capital. As the amount of labor rises in an industry, labor's marginal productivity falls.
The first fundamental welfare theorem provides some basis for the belief in efficiency of market economies, as it states that any perfectly competitive market equilibrium is Pareto efficient. The assumption of perfect competition means that this result is only valid in the absence of market imperfections, which are significant in real markets.