The model of perfect competition is the ideal form of market structure because it is the most efficient. With the help of diagrams, evaluate this statement.

Economics

IGCSE&ALevel

CAIE

Exam No：9708_w23_qp_42 Year：2023 Question No：3

Answer:

Knowledge points:

7.3.1 definitions of productive efficiency and allocative efficiency

7.3.2 conditions for productive efficiency and allocative efficiency

7.3.3 Pareto optimality

7.3.4 definition of dynamic efficiency

7.3.5 definition of market failure

7.3.6 reasons for market failure

7.6.1 perfect competition and imperfect competition: monopoly, monopolistic competition, oligopoly, natural monopoly

7.6.2 structure of the listed markets as explained by number of buyers and sellers, product differentiation, degree of freedom of entry and availability of information

7.6.3.1 legal barriers

7.6.3.2 market barriers

7.6.3.3 cost barriers

7.6.3.4 physical barriers

7.6.4.1 revenues and revenue curves

7.6.4.2 output in the short run and the long run

7.6.4.3 profits in the short run and the long run

7.6.4.4 shutdown price in the short run and the long run

7.6.4.5 derivation of a firm’s supply curve in a perfectly competitive market

7.6.4.6 efficiency and X-inefficiency in the short run and the long run

7.6.4.7 contestable markets: features and implications

7.6.4.8 price competition and non-price competition

7.6.4.9 collusion and the Prisoner’s Dilemma in oligopolistic markets, including a two-player pay-off matrix

The model of perfect competition is the ideal form of market structure because it is the most efficient. With the help of diagrams, evaluate this statement.

Answer:

Knowledge points:

Solution:

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