Perfect Competition has many firms producing homogeneous products with free entry and exit, resulting in price-taking firms and efficient outcomes. Characteristics: Large number of buyers and sellers (no individual firm affects price), Homogeneous/identical products (no brand loyalty), Free entry and exit (no barriers), Perfect information (all participants know prices and products), Zero transaction costs. Price determination: Market supply and demand set price; individual firms are price-takers (accept market price). Individual firm's demand curve: Perfectly elastic (horizontal) at market price—firm can sell any quantity at market price. Firm equilibrium: Produces where MC = Price (profit-maximizing condition); at market equilibrium, firms earn zero economic profit in long run. Efficiency: Allocatively efficient (P = MC); productively efficient (operates at minimum ATC). Examples: Agricultural markets (wheat, rice), stock markets, foreign exchange. Limitations: Rare in reality; few industries perfectly competitive. Regulatory approach: Antitrust laws aim to create competition-like conditions. ICAI questions: Identifying competitive markets, equilibrium conditions, efficiency properties. Exam tip: In perfect competition, P = MR = AR; firm's demand curve is horizontal at market price.