Pure And Perfect Competition: Analysis Of The Perfect Market

Perfect Competition
Pure or perfect competition is seldom noted in present enterprises but it is still essential to know the model since it benefits to the analysis of industries similar to the pure competition. Defined the perfect competition is a market of many producers and consumers will impact the market price but one of either has almost no impact depending on the general percentage as a whole. In terms of the products offered regardless of the sellers the products are still have the same basis. This also means that each firm is required to be price takers causing them to have no effect on the market price. Another condition is the free entry and exit of the market where the firms can come and go at will with a lack of barriers to say otherwise. As far as demand, each firm will see their demand as perfectly elastic. This will create a horizontal line at the price on the demand curve, not for the industry but only as it pertains to individual firms because they take the market price with no yield to the quantity that they produce. To

A loss is not guaranteed to be permanent and has three assumption to be made. Firstly entry and exit are the long run adjustments only. In the industry the firms will have the same cost curves, as well as the industry will have a constant return scale. With economic profits earned the firms enter the industry which will cause increase in the market supply resulting in a price decrease. Just as will anything if the short run losses are incurred the firms will leave and decrease the market supply and cause the price to rises until all losses are covered. Until there are no economic profits earned, the supply will remain steady. This model is considered the one of zero economic profits in the long run. The achievement of the long run equilibrium is met when the product price is completely equal and cause production at the point of minimum average total cost for each