Question

•Is pure competition a "desirable" market model for all industries? Should industries aspire for pure competition? Why or why not? •Think of an industry that does not function in a purely competitive market currently. Describe the changes that would be required, if this industry wanted to function under pure competition.

Answer 1

pure competition is a market with large number of sellers and buyers. the sellers are selling homogeneous products or identical products so they faces tough competition in the market also there is free entry and exit from the market. due to large number of sellers, individual seller can not influence the market price of the commodity or individual have very less share of the market. the pure competition market is Pareto efficient and also beneficial for the buyers from welfare aspect. the seller cannot exploit the buyers and earn huge profits. So pure competition is very desirable market model as whole for the economy but the industries does not want to operate under this model due to high competition and low profit margins in the market .

the industries should aspire for pure competition as it will increase the efficient utilization of resources and will increase the welfare in the economy. the customers will get products and services at efficient prices without  facing any kind of discrimination and exploitation.

generally pure competition is said be an unrealistic market model so basically no industry can function in pure competitive market but industries such as agriculture, dairy products etc. function in nearly pure competitive markets . if any industry wants to function in pure market then they have to produce homogeneous goods and firms under industry should be price taker and the market should be efficient so there will be no dead weight loss