Perfect Competition Essay Computers Past Present And Future Essay
If we compare the perfect competition market with other types of market structure, such as monopoly, monopolistic competition, and oligopoly, it will be obvious that the perfect competition is ideal mainly due to the presence of productive and allocative efficiency.
In perfect competition, there are a large number of small firms producing homogenous products, in other words, products produced by one firm is identical to the products produced by other firms in the market.
As far as that is concerned, one might recognize that a competitive market structure do exist in Florida (Competition, n.d).
In this part of USA, we do find about 70 companies marketing and distributing oil products to the consumers of oil.
Allocative efficiency is also not achieved, as price will always be set above marginal cost.
Monopolistic competition is a market in which there are may firms producing similar, but not identical, products, e.g. Firms produce differentiated products, and face downward-sloping demand curves.
If the firm is aiming to maximise profits, it will choose the level of output such that MR=MC.
An owner of a filling station or any consumer of the oil product would run away from the distributor who sets high price and buy from the one selling at a lower price.This is due to many factors but particularly the dissatisfaction of the characteristics of a perfect competition market as described above.As soon as a firm in a perfect competition decreases its price, it enters the realm of...Among these companies are: 76 Lubricants, A Plus Auto Oil Change Etc, Bahamas Miracle Crude Oil, Bulk Cooking Oil Solutions, LLC, Capital Oil & Gas, Genpass Technologies, Longrun Oil Corp, Mr Oil and Oil Lube Express of W Melbourne.Most of these companies do have their own filling stations though they also make distributions of oil to other filling stations they do not own. The high number of the marketers and distributors of this product indicate that no single company can have control over oil prices.As should be, there is a freedom of entry and exit of firms.Both the consumers and producers have a perfect knowledge of market conditions.It is a condition where each market should be and is used as a model to understand and predict real life situations.However, Samuelson writes that perfect competition does not faithfully represent many of the facts about modern industry because life in the economic world can never be perfect.English: Long-run equilibrium of a firm under monopolistic competition, demonstrating that it makes only normal profit. Licensed under GNU Free Documentation License" data-lightbox="media-gallery-1567771790" min(ATC).In the long run, however, only normal profits will be made, since P will equal min(ATC) exactly. Licensed under GNU Free Documentation License" data-lightbox="media-gallery-1567771790"It works best for both the buyers and sellers and works in accordance to each person's needs and abilities.