Perfect Competition and Market Power

sellers can’t raise their prices above the current market price
- they won’t sell their product if they do this
with perfect competition, there are a large number of buyers and sellers
there free entry and exit into the market

perfectly competitive markets are rare
market power: the power to raise the price above the marginal cost without fear that the firm will lose too much in sales to competing businesses
marginal cost: change in total costs from producing an additional unit of output
- example:
- if the total cost was given by TC = 20 x Q
- marginal cost = 20
on a graph, when the total cost schedule is a straight line, the marginal cost schedule will be constant
- a horizontal line
- height of the horizontal line is the slope of the total cost line

market structure: provides a description of how firms compete against each other in order to sell their goods or services to the consumers
- perfect competition
- monopolies
- oligopolies/duopoly
- monopolistic competition