Explore BrainMass

A perfectly competitive market

Please help with the following:

Discuss how a company that is competing in a purely (or perfectly) competitive market should increase its competitive stance in the marketplace. Provide specific examples.

Determine how a perfectly competitive firm can maximize its profit by producing the output at which average cost is minimized.

Solution Preview

How a company in a perfectly competitive market can increase competitive advantage:

A perfectly competitive market is characterized by a large number of sellers who produce homogeneous products and has low barriers to entry and exit. Perfectly competitive markets are challenging to a firm as a consumer can buy products and services from any seller (Perfectly Competitive Markets, 2011). Perfect competitive markets result in price taking since no single buyer or seller can influence the buying or selling price.

A firm operating in a perfectly competitive market can improve competitive positioning through product differentiation. Differentiation involves increasing a product's or service perceived value compared to perceived value of products and services offered by other companies. Through product differentiation, customers will perceive products offered by the company as more valuable compared to competing products. Differentiation Strategy (2010) provides ...

Solution Summary

A perfectly competitive market is examined.