Perfect Competition Essay

Perfect Competition Essay-55
Perfect competition is the most stable market form, and hence the most desirable.It leads to the best possible efficiency for the firm.

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Therefore, demand will be relatively price-elastic. Firms are able to join the market if they observe that existing firms are making super-normal profits.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.The demand curve is equal to the marginal revenue curve meaning that the firm sells whatever it produces and there is no inventory tax.Having MR=MC, the firm makes as much profit as possible.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.There are different kinds of market structures in this economy.Perfect competition, as one of them, is often described as the ideal market structure, and only treated as a theoretical ideal.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.

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