Explain the assumptions behind perfect competition and how firms behave under this market structure.

Perfect competition assumes that everyone has perfect information (no asymmetries). In addition, under perfect competition, there are many firms selling a homogeneous product. No one firm can have an effect on price, thereby implying that each supplier is a price taker (rather than a price setter). Price is set at marginal cost. 

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Answered by Tierney R. Economics tutor

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