ECON101 Chapter Notes - Chapter 12: Economic Surplus, Social Cost, Average Variable Cost

• School: University of Waterloo
• Department: Economics
• Course: ECON101
• Professor: Emanuel Carvalho

Document Summary

Perfect competition is a market in which. Many firms sell identical products to many buyers. There are no restrictions on entry into the market. Established firms have no advantage over new ones. Sellers and buyers are well informed about prices. Farming, fishing, wood pulping, and paper milling, the manufacture of paper cups and shopping bags, grocery retailing, photo finishing lawn services, plumbing, painting, dry cleaning, and laundry services are all examples of highly competitive industries. Perfect competition arises if the minimum efficient scale of a single producer is small relative to the market demand for the good or service. In this situation, there is room in the market for many firms. A firm"s minimum efficient scale is the smallest output at which long-run average cost reaches its lowest level. In perfect competition, each firm produces a good that has no unique characteristics, so consumers don"t care which firm"s good they buy.