Perfect Competition, Oligopoly, And Monopoly Essay

1988 WordsOct 30, 20168 Pages
The marketplace consists of four main structures: perfect competition, monopolistic competition, oligopoly, and monopoly. Perfect Competition A perfectly competitive market system was best described by Keynes (1927): “[laissez-faire] [i] implies that there must be no mercy or protection for those who embark their labor in the wrong direction (Honja, 2015). It is a method of bringing the most successful profit-makers to the top by a ruthless struggle for survival, which selects the most efficient by the bankruptcy of the less efficient (Honja, 2015). Perfect competition is an idealized market structure that realizes an effective distribution of resources. This proficiency is attained for the reason that the profit-maximizing quantity of output produced by a perfectly competitive firm results in the equivalence between price and marginal cost. In the short run, this encompasses the equality between price and short-run marginal cost. In the long run, this is seen with the equality between price and long-run marginal cost at the minimum efficient scale of production. The environment for perfect competition, includes: (1) large number of small firms, (2) identical products sold by all firms, (3) freedom of entry in to and exit out of the industry, and (4) perfect knowledge of prices and technology, ensure that perfect competition efficiently allocates resources (Honja, 2015) (5) no governmental interference (6)
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