<Tr> <Td> <Ul> <Li> </Li> <Li> </Li> <Li> </Li> </Ul> </Td> </Tr> <Ul> <Li> </Li> <Li> </Li> <Li> </Li> </Ul> <P> In economics, specifically general equilibrium theory, a perfect market is defined by several idealizing conditions, collectively called perfect competition . In theoretical models where conditions of perfect competition hold, it has been theoretically demonstrated that a market will reach an equilibrium in which the quantity supplied for every product or service, including labor, equals the quantity demanded at the current price . This equilibrium will be a Pareto optimum, meaning that nobody can be made better off by exchange without making someone else worse off . </P> <P> Such markets are allocatively efficient, as output will always occur where marginal cost is equal to marginal revenue (MC = MR). But perfectly competitive markets are not necessarily productively efficient as output will not always occur where marginal cost is equal to average cost (MC = AC). In perfect competition, any profit - maximizing producer faces a market price equal to its marginal cost (P = MC). This implies that a factor's price equals the factor's marginal revenue product . It allows for derivation of the supply curve on which the neoclassical approach is based . This is also the reason why "a monopoly does not have a supply curve". The abandonment of price taking creates considerable difficulties for the demonstration of a general equilibrium except under other, very specific conditions such as that of monopolistic competition . </P>

Markets for goods and services appear in a number of firms. in perfectly competitive markets