A Perfect Competition Market

1202 WordsJun 11, 20155 Pages
In a perfect competition market, there are many buyers and sellers. There are a vast number of businesses, which sell products that are closely related (but not homogeneous). Thus, this generates a lot of competition. In a monopoly market there is only one business, which is manufacturing or selling a product. Therefore, this business powers that specific industry and there is likely no competition. (ii) (iii) (iv) (v) In monopoly markets, there are modest changes in the output or price of any business, but this will have no influence on sales of any other organization. The one advantage of this is that they do not have to worry about competitors responding to every price/output change. In perfect competition, both buyers and sellers can’t influence the market price by increasing/decreasing their purchases/output. This means that the price of products is determined by taking into account two market forces, namely market demand and market supply. (vi) In perfect competition, there are no legal, social or technological barriers to the entry or exit of the market. This allows freedom to enter and exit, with no worry of added costs in the long-term. In monopoly markets, business are free to enter and exit from the industry whenever they wish. However, it is not as easy to enter into the industry via a monopolistic market than it would be in perfect competition. b) I think it is still useful to study perfect competition, as even though it is hard to find
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