What are the characteristics for perfect competition firms and when do they make profit?

The chracteristics of perfect competition are: many firms, freedom of entry and exit, all firms produce identical or homogenous products, all firms are price takers(have no influence over the price) and have a perfectly e;astic demand curve, there isd perfect information and knowlege between the firms. 

When firms in PC make profits, they are called abnormal profits and they can happen just in the short run because in the long run, other firms won't follow and raise their prices, consequently leading to a decrease in the quantity demanded of the firm with higher prices making abnormal profits.

Answered by Diana C. Economics tutor

4323 Views

See similar Economics GCSE tutors

Related Economics GCSE answers

All answers ▸

What are supply side policies and how do they effect the economy?


What is the difference between an inferior good and a normal good?


Explain the effect on the Pound if the MPC decides to increase the base rate of interest.


Explain one negative externality that could occur due to the building of a new airport


We're here to help

contact us iconContact usWhatsapp logoMessage us on Whatsapptelephone icon+44 (0) 203 773 6020
Facebook logoInstagram logoLinkedIn logo

© MyTutorWeb Ltd 2013–2024

Terms & Conditions|Privacy Policy