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Perfect Competition

Perfect competition is a theoretical market structure that is typically not found in reality. It serves as an important concept as there are many markets out there that are very close to perfect competition or still exhibit many of the behaviours of a perfectly competitive market structure. There are a number of properties that characterize perfect competition. There are an infinite number of buyers and sellers. This implies that each buyer or seller has an infinitesimally small market share and therefore his or her individual choices do not affect the market at all. There is perfect information. Each buyer and seller knows all the information about prices, suppliers, consumers, preferences, quantities, etc about the market. So, no inefficiencies can stem from asymmetries in information. The product sold is homogenous; iut does not matter who you buy the good from. Lastly, there are no barriers to entry and exit. Firms can enter and exit freely and without cost (cost would be a barrier). 

In this market structure the price of a product is determined by the market supply and the market demand. The demand for an individual firm will be a perfectly elastic demand curve at the level of this market price. This will also represent the average and marginal revenue of the firm. In the short run firms can earn positive or negative profits. Positive profits can occur whenever the price is higher than the average costs of production for the firm. But, in the long run firms earn zero profits because of entry and exit.

Consider a market such as the rice market, which is considered quite close to perfect competition, where the price is above average cost and farmers are making a positive profit. Other farmers, seeing this, will enter the market to take advantage fo these positive profits. As they do so, the market supply will increase which will force the market price to fall. The market price continues to fall until there is no more positive profit. At this point entry will also stop and the market will have achieved long run equilibrium

Perfectly competitive markets are capabale of achieving allocative and productive efficiency

Explaining Monopoly Markets

1. Choose a market or industry that you think is close to perfectly competitive. Is the market really perfectly competitive? Can absolute perfect competition exist in the "real world?" 2. Take a look at the latest annual report for the Tennessee Regulatory Authority at: http://www.state.tn.us/tra/reports/annualrpts/anlrp

How Starbucks works with monopolies, oligopolists, and competitors

How would a monopolistic company like Starbucks find itself working with organizations in the same industry that are an oligopoly, perfect competition, or monopoly market structure. Please examine the different sectors within the coffee industry and how market structure may vary within those sectors.

Long-run perfectly competitive firms

In long-run equilibrium a perfectly competitive firm will operate where the price is: Select one: a. greater than MR but equal to MC and minimum ATC b. equal to MR, MC and minimum to ATC c. greater than MC and minimum ATC, but equal to MR d. greater than MR and MC, but equal to minimum ATC For firms in perfe

Good Product or Service to Sell Online

What is a good product or service to sell online? I'm thinking a motivational line of books. 1-2 sentences needed per section Market Summary Market Demographics Market Needs Market Trends Market Growth Competition Target Markets Marketing Research.

Perfect Competition Products

Which of the following is (are) most likely to be produced under conditions resembling perfect competition - automobiles, beer, corn, diamonds, and eggs? Defend your answer in economic terms.

What market structure best characterizes the market in which universities compete?

What market structure best characterizes the market in which universities compete? How does this structure influence the university's pricing strategy? How does the university differentiate its product from that of its competitors? Has the University erected non-price barriers to entry in this market? Can the University do more

Marketing MIX

Marketing mix is the controllable set of activities that the firm uses to respond to the wants of its target markets. Create a report on the marketing mix and keep the following questions in mind: -Describe what is meant by marketing mix. -Describe and discuss the different elements of the marketing mix for a product of yo

Imperfect Competition

Barriers to entry help maintain market power and earn positive economic profits. These factors apply to all imperfectly competitive firms. Discuss these barriers and provide real-world examples.

Marketing

1. Write two paragraphs on the marketing strategy, the university investors are using to identify their target market. 2. What in your opinion would be the basis for segmenting consumer markets in the attached case? 3. Roy Lindale, a retiree, wants to open a wholesale nursery that sells seedlings, potted plants, and shrub

Calculate AFC, ATC, MC and TC.

A firm has total fixed costs of $60 and average variable costs as indicated in the table below. Total Output Average Variable Cost 0 $0 1 45.00 2 42.50 3 40.00

Calculating When a Firm Should Shut Down

Assume you are the plant manager for Crossroads Sign Company, which produces road signs in a market that approximates perfect competition. Due to a slow economy, business has been slow and the company is losing money every month. The owners have asked you whether to continue operations or to shut down at least until the economy

Multiple choice question dealing with market theory.

____ yields the same results as the theory of perfect competition, but requires substantially fewer assumptions than the perfectly competitive model. Baumol's sales maximization hypothesis The Pareto optimality condition The Cournot model The theory of contestable markets none of the above

Industry environment : then and now

Assume that Donna buys only xavier steak ("x") or yams ("y". Donna's indifference curves, if mapped into a geometric plane, would have a slope of -2 when she has more y's than x's, but would fall at a rate of -1/2 when the opposite is true (more x's than y's). If Donna has 24 x's and 36 y's and you offered her 34 x's, how many

The answer to calculating optimal output and profit

Calvin's Barbershop is a popularly-priced hair cutter on the south side of Chicago. Given the large number of competitors, the fact that barbers routinely tailor services to meet customer needs, and the lack of entry barriers, it is reasonable to assume that the market is perfectly competitive and that the average $15 price equa

Managerial Economics

Why are businesses that operate in a perfectly competitive market considered "price takers"?

Asymmetrical information

How does asymmetrical information affect the product market? PLEASE USE ANY CITATION, EXCEPT WIKIPEDIA, ENCARTA, OR WORLD BOOK

expected value and variance .

1.The following table shows the expected value and variance for 5 projects a firm can undertake. Project Expected Value Variance A $100 $124 B $220 $110 C $100 $138 D $180 $138 E $200 $124 a. Project B dominates all others. True or False? Why? . b. Project C is the least preferable. True or False? Why? c. If the me

Managerial Economics

Output FC VC TC TR Profit/Loss 0 100 0 1 100 100 2 100 180 3 100 300 4 100 440 5 100 600 6 100 780 A. Complete the table B. At what output rate does the firm maximize proft or minimize loss? C. What is t

Market structure: Perfect competition

1. Complete the following statements for a firm in a perfectly competitive industry (8 points each): a. The firm makes economic profit if the market price for the product is above ___________________ b. The firm's marginal revenue (MR) is the same as the _______________________ c. The firm's breakeven point

Expected Market Price & Profits

You are the manager of a firm that sells a commodity in a market that resembles perfect competition, and your cost function is C(Q)=Q+2Q^2.Unfortunately, due to production lags, you must make your output decision prior to knowing for certain the price that will prevail in the market. You believe that there is a 60 percent chanc

Perfect Competition

The attached files are self-practice exercices on Perfect Competition. I need help on pages 13 and 14 Nos. 4, 5, and 8. Please use MS Excel software to complete graphs for problem 8.

Short Run vs Long Run

Beer and wine are the only goods produced in an economy characterized by perfect competition. Suddenly there is a permanent shift in the preferences of consumers in favor of beer and away from wine. How would this effect the short and long run for wine? Wouldn't wine suffer a loss in both or just one?