Market Structures... Economists try to identify market structures in order to understand how firms and consumers behave. We characterize market structures by the number of buyers or sellers who are...

Extracted text: Market Structures... Economists try to identify market structures in order to understand how firms and consumers behave. We characterize market structures by the number of buyers or sellers who are present, by the relative ease with which a new seller may enter the market, by the variation in the product from one supplier to the next, and by the amount of competition present. Perfect Competition Perfect competition is the most competitive market structure. A market with perfect competition has a large number of buyers and sellers. In this type of market, there are no barriers to entry or exit, which means a new seller will have a fairly easy time if he wants to start doing business. The product is homogeneous, in the sense that one bushel of wheat isn't really all that different from any other bushel of wheat. A perfectly competitive market is also characterized by the availability of perfect information, or free and equal access for everyone to information about the product, its price, and the firms. A firm in perfect competition sells a product with perfectly price-elastic demand (the "rubber band" variety). The firm is forced to be a price-taker. It has no choice but to sell at the market price. If a firm sells its product at a price over the market price, it won't earn any revenue-since goods are homogeneous, consumers will simply switch to another firm's product. Examples of Perfectly Competitive Markets -wheat •silver livestock . euros gold •yen 2.30 IN BRIEF Short answer. Write a response to each of these prompts about perfectly competitive markets. 1. How many buyers and sellers are there? 2. How easy or difficult is it for a new seller to enter the market? 3. How different is one seller's product from the next? 5. How much information is available to buyers and sellers about the market? 6. How does a seller decide upon a sale price?