Perfectly Competitive Firm

Definition

A perfectly competitive firm exists in an industry with many small firms that produce identical products. These firms have no market power and are price takers, meaning they have to accept the market price for their goods or services.

Related terms

Price Taker: A price taker is a firm that has no control over the market price and must accept it as given.

Homogeneous Products: Homogeneous products are goods or services that are identical in nature, leading to perfect substitutes with no differentiation.

Market Equilibrium: Market equilibrium occurs when the quantity demanded equals the quantity supplied at a specific price, resulting in no shortage or surplus.