Perfect competition is a type of market structure, predicated on the assumption of:
- A large number of firms, so each firm’s output is small relative to the size of the market, and firms act independently of each other. The actions of one firm does not affect the actions of others
- All firms produce identical or homogeneous products; it isn’t possible to distinguish the product one firm versus another
- The is no barriers to entry and exit for firms in the industry.
- There is perfect resource mobility — resources for production are completely mobile and can be easily and without any cost be transferred between firms and industries.