A core part of the A-level economics specifications is the theory of the firm. Therefore you need to be aware of how firms take decisions, and the way in which this is influenced by the market environment in which they operate. At the heart of this analysis is the notion of perfect competition, which has often been maligned by students as resting on highly unrealistic assumptions, and thus remote from reality.
Here, I look at a question drawn from the AQA examination in January 2013, which calls for an evaluation of perfect competition and a discussion of whether the rise of the internet is making the theory more realistic. I will not be producing a ‘model’ answer to the question, but I will consider key ideas that should underpin your response to a question such as this. You may then wish to think about how you would go about embedding these ideas into your own essay. Note that within the AQA exam, candidates were advised to devote 1 hour to tackling this question.
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