Question

In: Economics

As a producer, which market structure is more favorable? Please explain your answer.

As a producer, which market structure is more favorable? Please explain your answer.

Solutions

Expert Solution

Pure or optimal competition is a theoretical structure of the market, where the following conditions are met:
Both businesses market the same product (the product is a 'commodity' or 'homogeneous' product).
All the firms are price takers (they can't control their product's market price).
Business shares are invaluable.
Buyers have maximum or "good" knowledge about the commodity being marketed and the prices paid by each company in the past, present and future.
Tools are ideally flexible for such work.
Companies can enter or exit the market at no charge

Perfect competition is an ideal type of market structure where both producers and consumers have complete and symmetrical information, no transaction costs, and where a large number of producers and consumers compete with each other.
Theoretically, total competition is the opposite of a monopolistic market.
Since all actual markets exist beyond the plane of the ideal model of competition, each may be categorized as imperfect.


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