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Perfect competition

In economics, perfect competition is a type of market in which sellers sell the same product with no differentiation.

Expanded Definition

In a perfectly competitive market, the sellers and buyers are price-takers -- that is, they must accept the selling price that is set by the intersection of the industry supply and demand curves. Sellers can sell all that they produce at the market price, but if they raise the price, they sell nothing. The company's demand curve is horizontal, perfectly elastic. The industry's demand curve is downward sloping.

There are no barriers to entry into such a market.

Whether this type of market truly exists or not is open to debate.

Examples put forth to illustrate this type of market include some agricultural items, such as wheat or corn, and the autctions on eBay, where all one needs is a bit of computer knowledge. One could also have included such products as floppy disks or CD-ROM disks for computers.

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