Why is perfect competition sometimes regarded as an ideal market structure and why does Samuelson write that it doesn't faithfully represent the facts about modern industry?
Date Submitted: 12/29/2004 02:01:59
Category: / Business & Economy / Economics
Length: 2 pages (557 words)
Category: / Business & Economy / Economics
Length: 2 pages (557 words)
Perfect competition sometimes is regarded as an ideal market structure because it
supports the actual ideology of a free market economy where, for example there is no government intervention. The entrepreneur in perfect competition works independent of other entrepreneurs and each individual buyer or seller does not influence the market, there are perfect substitutes for all goods and the demand is perfectly elastic, hence there is no price rise or fall. As should be, there …
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…MC=Price and this is the point where profits are maximized. This is hardly possible in real life, the MC curve will either be less than the MR or more, it's hard indeed for them to be perfectly equal. Some firms operate on short run and do not tend to be perfectly competitive
One reason why perfect competition does not represent the face of the modern industry is because it is so hard to achieve.
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