ECO 304L Lecture Notes - Lecture 5: Takers, Opportunity Cost, Perfect Competition
Document Summary
Suppose that portugal and austria both produce oil and wine. Portugal"s opportunity cost of producing a bottle of wine is 4 barrels of oil while austria"s opportunity cost of producing a bottle of wine is 10 barrels of oil: markets and competition. In a perfectly competitive market, all producers sell error! Because of these two characteristics, both buyers and sellers in perfectly competitive markets are priceerror! True or false: the market for lettuce does exhibit the two primary characteristics that define perfectly competitive markets. Perfectly competitive markets are characterized by large numbers of buyers and sellers who cannot influence market prices and buy and sell identical products. Although in reality, most markets do not perfectly adhere to the assumptions of the perfectly competitive markets, some markets are very close to perfect competition. For example, the market for lettuce has millions of consumers who buy lettuce, as well as thousands of farmers producing and selling lettuce.
