Perfect competition is a theoretical market structure in which perfect information and free entry of firms creates a situation where no single firm has the power to dictate the terms of a market. In this economic environment, firms produce homogeneous goods at a price determined by the interaction of demand and supply. Firms are also unable to earn profits in the long run, as any profits made will eventually entice new firms into the market, creating an increase in the number of competitors until all profits fall to zero. This is the ideal model of market economics and is used to study real-world markets and their efficiency.