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Perferct Competition

In: Other Topics

Submitted By Martin72
Words 1166
Pages 5
Perfect Competition
Perfect competition is a problem that is emerging in a market in which buyers and sellers are informed about all elements of monopoly that are absent and the market price of a commodity is not control by individual buyers and sellers. Perfect competition is simply looked as a market structure where competition is at its greatest possible level. According to Kirzner (2000), “Perfect competition therefore came to mean the situation in markets where each and every participant lacks any power whatever directly to influence product price or product quality”. Perfect competition is used to compare other and real-life market structures. A real life market structure such as agriculture is the industry that closely resembles a perfect competition. The four key characteristics of perfect competition are a large number of small firms, identical products sold by all firms, perfect resource mobility or the freedom of entry into and exit out of the industry, and perfect knowledge of prices and technology. These four characteristics basically describes that a perfectly competitive firm does not have any control over the market. A large number of small firms that produce identical products have a large number of perfect substitutes that exist for the output produced by any given firm. This means the demand curve for a perfectly competitive firm's output is perfectly elastic. Freedom of entry into and exit out of the industry means that capital and other resources are perfectly mobile and that it is not possible to erect barriers to entry. Perfect competition is that all firms operate by the same guidelines and that all buyers know about all substitutes for a given good that firms produce that are identical products.
Perfect competition is the opposite of a monopoly. A perfect competition is when a firm supplies a particular good or service in which the firm...

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