Why perfect competition is the best market structure

Why perfect competition Executive Summary This report provides information related to the four main market structures and why perfect competition is the most efficient. Features of four market structures and comparison of monopoly and perfect competition. Perfect completion is most efficient Subject matter Details Conclusions Introduction Market structure is best defined as the organizational and other characteristics of a market. We focus on those characteristics which affect the nature of competition and pricing.Traditionally, the most important features of market structure are: 1. Number of Buyers and Sellers: Number of buyers and sellers of a†¦show more content†¦an individual firm has no control over the price and has to accept the price as determined by the market forces of demand and supply. Monopoly: A monopolist is a Price-Maker, i.e., a firm has complete control over the price and fixes its own price. Monopolistic Competition: A firm under monopolistic competition has partial control over the price, i.e. each firm is neither a price-taker nor a price-maker. An individual firm is able to influence the price by creating a differentiated image of its product through heavy selling costs. Oligopoly: A firm under oligopoly follows the policy of price rigidity. Although, the firm can influence the prices, but it prefers to stick to its prices so as to avoid a price war. (II) Nature of Demand Curve: i. Perfect Competition: The demand curve for a perfectly competitive firm is perfectly elastic as it has to accept the price fixed by the market forces of demand and supply. ii. Monopoly: The monopoly firm faces a downward sloping demand curve as more quantity can be sold only at a lower price. iii. Monopolistic Competition: The firm under monopolistic competition also faces a downward sloping demand curve as more quantity can be sold only at a lower price. However, the demand curve is more elastic in comparison to demand curve under monopoly because of presence of close substitutes. iv. Oligopoly: The demand curve for an oligopoly firm is indeterminate, i.e. it cannot be drawn accurately as exactShow MoreRelatedMarket Structure Of A Business1357 Words   |  6 Pagesâ€Å"Today, the forces of competition, technology, and globalization have converged to spur innovation and to transform the way business is done in the securities industry.† (Arthur Levitt) Market structure is best defined as the organization and other characteristics of a market. How a business succeeds is based on the market, they choose to enter into. 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