Examples of perfect information in the following topics:
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- Perfect competition is a market structure that leads to the Pareto-efficient allocation of economic resources.
- Perfect competition: An industry structure in which there are many firms, none large enough to influence the industry, producing homogeneous products.
- Perfect competition leads to the Pareto-efficient allocation of economic resources.
- Both buyers and sellers have perfect information about the price, utility, quality, and production methods of products.
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- As a field, economics deals with complex processes and studies substantial amounts of information.
- People act independently on the basis of full and relevant information.
- Critics have stated that assumptions cause economists to rely on unrealistic, unverifiable, and highly simplified information that in some cases simplifies the proofs of desired conclusions.
- Examples of such assumptions include perfect information, profit maximization, and rational choices.
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- Free markets may have different structures: perfect competition, oligopolies, monopolistic competition, and monopolies are all types of markets that may exist in a capitalist economy.
- The most basic models in economics assume that markets are free and experience perfect competition - there are many buyers and sellers so no individual actor may affect a good's price; there are no barriers to exit or entry; products are homogeneous; and all actors in the economy have perfect information.
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- At one extreme is perfect competition.
- In a perfectly competitive market, there are many producers and consumers, no barriers to enter and exit the market, perfectly homogeneous goods, perfect information, and well-defined property rights.
- There are few differences in quality between providers so goods can be easily substituted, and the goods are simple enough that both buyers and sellers have full information about the transaction.
- Monopoly and perfect competition mark the two extremes of market structures, but there are some similarities between firms in a perfectly competitive market and monopoly firms.
- Perfect competition produces an equilibrium in which the price and quantity of a good is economically efficient.
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- The concept of perfect competition applies when there are many producers and consumers in the market and no single company can influence the pricing.
- All goods in a perfectly competitive market are considered perfect substitutes, and the demand curve is perfectly elastic for each of the small, individual firms that participate in the market.
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- The optimal solution to the allocation problem requires the participants to have accurate information about the marginal costs and marginal benefits associated with specific alternatives.
- The information about MC and MB revealed by market exchanges (like all information) is never perfect.
- Pure competition is one way to ensure that no one buyer or seller has the ability to alter the outcome of market exchanges and the information revealed in prices.
- The existence of market power allows a buyer or seller to influence the outcome of a market exchange and distort the information about MB and MC.
- Attenuated or weakened property rights also may distort information about MB and/or MC and result in an allocation that is less than optimal.
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- Gini Index: One of the most commonly used income inequality metric is the Gini Index, which uses a straightforward 0-1 scale to illustrate deviance from perfect equality of income.
- A 1 on this scale is essentially socialism, or the perfect distribution of capital/goods.
- In this case, 0 indicates perfect equality, and 1 indicates perfect inequality.
- When there is perfect equality, maximum entropy occurs because earners cannot be distinguished by their incomes.
- To simplify the information above, the basic concept behind measuring inequality is identifying an ideal and tracking any deviance from that ideal (which would be deemed the inequality of a given system).
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- Monopolistic competition is a type of imperfect competition such that many producers sell products that are differentiated from one another as goods but not perfect substitutes (such as from branding, quality, or location).
- Unlike in perfect competition, firms that are monopolistically competitive maintain spare capacity.
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- Public policy seeks to minimize unemployment by providing information, training, facilities, and other programs to assist the unemployed.
- It exists because the labor market is not perfect and there may be mismatches between job-seekers and jobs before workers are hired for the right position.
- These include offering advice and resources for job-seekers and providing clear and transparent information on available jobs and workers.
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- Perfect Substitutes: To understand what a indifference curves will look like when products are perfect substitutes, please see .
- Perfect substitutes are often homogeneous goods.
- Perfect Complements: The opposite of a perfect substitute is a perfect complement (see ), which is illustrated graphically through curves with perfect right angles at the center.
- In this particular series of indifference curves it is clear that 'Good X' and 'Good Y' are perfect substitutes for one another.
- Describe the indifference curves for goods that are perfect substitutes and complements