Perfect competition is a market structure characterized by a large number of buyers and sellers of essentially the same product. Each market participant is too small to influence market prices. Individual buyers and sellers are price takers. Firms take market prices as given and devise their production strategies accordingly. Free and complete demand and supply information is available in a perfectly competitive market, and there are no meaningful barriers to entry and exit. As a result, vigorous price competition prevails. Only a normal rate of return on investment is possible in the long run. Economic profits are possible only during periods of short-run disequilibrium before rivals mount an effective competitive response.
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