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Perfect competition provides both allocative efficiency and productive efficiency: Such markets are allocatively efficient, as output will always occur where marginal cost is equal to average revenue i.e. price (MC = AR). In perfect competition, any profit-maximizing producer faces a market price equal to its marginal
The correct sequence of the market structure from most to least competitive is perfect competition, imperfect competition, oligopoly, and pure monopoly. The main criteria by which one can distinguish between different market structures are: the number and size of firms and consumers in the market, the type of goods and services being traded ...
"Perfect Competition" refers to a market structure that is devoid of any barriers or interference and describes those marketplaces where neither corporations nor consumers are powerful enough to affect pricing. In terms of economics, it is one of the many conventional market forms and the optimal condition of market competition. [12]
Monopoly is the opposite to perfect competition. Where perfect competition is defined by many small firms competition for market share in the economy, Monopolies are where one firm holds the entire market share. Instead of industry or market defining the firms, monopolies are the single firm that defines and dictates the entire market. [10]
The market should adjust to clear any profits if there is perfect competition. In situations where there are non-zero profits, we should expect to see either some form of long run disequilibrium or non-competitive conditions, such as barriers to entry, where there is not perfect competition between firms. [5] [full citation needed]
The Herfindahl Index (HHI) ranges from 1/N (in case of perfect competition) to 1 (in case of monopoly), where N is the number of firms in the market. Equivalently, if percents are used as whole numbers, as in 75 instead of 0.75, the index can range up to 100 2, or 10,000. Herfindahl-Hirschman Index
For phenomena of type I [i.e. perfect competition], when equilibrium takes place at a point of tangency of indifference curves, the members of the collectivity enjoy a maximum of ophelimity. He adds that 'a rigorous proof cannot be given without the help of mathematics' and refers to his Appendix. [14]
An absence of any of the conditions of perfect competition is considered a market failure. Regulatory intervention may provide a substitute force to counter a market failure, which leads some economists to believe that some forms of market regulation may be better than an unregulated market at providing a free market. [2]