Question

1. Please define and describe the characteristics of a Perfectly Competitive market structure. What, if any, are features that are in common between Perfect Competition and Monopoly? Please describe what you think is one primary difference.

Answer 1

Perfect competitive market structure means in which there are perfect competition is exists.like there were large number of buyer and sellers hence price is decided on the basis of perfect competition.

Characteristics -

There were large number of buyer and sellers hence no influence on the prices set by the market.product should be homogeneous.there were no barrier of entry and exist in the market.In this type of structure buyer and seller have perfect knowledge.they also have perfect knowledge of factor of production and goods.All factors of production and goods are moveable.No one can control the price of goods.

Common features of monopoly and perfect competition

When we talk about monopoly and perfect competition then both are having large firm.Competition is higher in both type of structure.There will be no barrier of entry and exists in both market structure.They can earn high profit or super normal profit or losses in both type of structure.

Difference -

Perfect competition firm have homogeneous product.while in monopoly there is product differential.