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Topic: Perfect competition

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In the News (Wed 20 Mar 19)

  Platonic Competition - Mises Institute
The doctrine of "pure and perfect competition" is a central element both in contemporary economic theory and in the practice of the Anti-Trust Division of the Department of Justice.
Competition is viewed as the means by which prices are driven down either to equality with "marginal cost" or to the point where they exceed "marginal cost" only by whatever premium is necessary to "ration" the benefit of plant and equipment operating at full capacity.
Price competition is not the self-sacrificial chiseling of prices to "marginal cost" or their day by day, minute by minute adjustment to the requirements of "rationing scarce capacity." It is the setting of prices perhaps only once a year — by the most efficient, lowest-cost producers, motivated by their own self-interest.
www.mises.org /story/1988   (5050 words)

Perfect competition is an idealized version of market structure that provides a foundation for understanding how markets work in a capitalist economy.
To understand the nature of competition under the perfectly competitive market form, one should briefly examine the three conditions that are necessary before a market structure is considered "perfectly competitive." These are: homogeneity of the product sold in the industry, existence of many buyers and sellers, and perfect mobility of resources or factors of production.
Perfect competition is considered desirable for society for at least two reasons.
www.referenceforbusiness.com /encyclopedia/Clo-Con/Competition.html   (4124 words)

 Platonic Competition, Part II
As examples of “monopolistic competition,” Professor Bach cites Kellogg and Post in the field of breakfast cereals, and RCA and Philco in the field of television sets—even though these industries are fully as “oligopolistic” as the automobile or steel industry.
Price competition is not the self-sacrificial chiseling of prices to “marginal cost” or their day by day, minute by minute adjustment to the requirements of “rationing scarce capacity.” It is the setting of prices perhaps only once a year—by the most efficient, lowest-cost producers, motivated by their own self-interest.
The price competition of A and P was so successful that the supporters of “pure and perfect competition” have never stopped complaining about all the two-by-four grocery stores that had to go out of business.
www.freemarketnews.com /Analysis/158/5021/2006-05-24.asp?wid=158&nid=5021   (1849 words)

 Open Society
Perfect competition provides economic units with alternative situations that are only marginally inferior to the one which they actually occupy.
Perfect competition is described by economic theory in the following way: a large number of individuals, each with their own scale of values, is faced with a large number of alternatives among which they can freely choose.
Effective competition reduces the dependence of one factor upon another and under the unreal assumptions of perfect competition the dependence disappears altogether.
www.osi.hu /oss/ch2e.html   (4365 words)

 The Money Machine
Perfect competition means economic forces at work, uninterrupted by any other force.
Another condition caused by perfect competition is zero profit condition, the condition that in the long run, total profit made is zero.
Monopolistic competition is a market structure in which many companies operate independent of each other (although not so many as to be the number approaching infinity specified by perfect competition) in an industry.
library.thinkquest.org /C004323/micro2.html   (1407 words)

 Bruce Bartlett Opinion Editorial: The Flawed Idea of "Perfect Competition"
Perfect competition, the professor likely said, is an essential prerequisite for capitalism.
The problem is that the conditions necessary for the achievement of perfect competition are extremely high.
But even if one still accepts that perfect competition is some sort of ideal to strive for, changes in our economy brought about by computers and the internet are in fact bringing us closer to it.
www.ncpa.org /oped/bartlett/jun1699.html   (617 words)

 The impossibility of perfect competition   (Site not responding. Last check: 2007-10-06)
Perfect competition is the one of the very first concepts to which a new student of economics is introduced.
Though many advances in economic theory are based on attempting to move away from reliance on the concept of perfect competition, it remains a key reference point for economic theory.
The model of perfect competition assumes that firms are atomistic and non-collusive: they do not respond to the actions of other firms, but merely to changes in demand and their own conditions of supply.
www.debunking-economics.com /Maths/size.htm   (1688 words)

 Catallarchy » Theory of Perfect Competition = Bollocks
Which is, of course, the whole point of competition, and thus illustrates the absurdity of the Perfect Competition concept.
Competition, in part, is the continual adjustment by firms to ever changing circumstances, and not simply an optimization equation run in static equilibrium…;
The perfect competition is the threat of mediocrity that erodes stock prices and dividends, and destroys executive careers.
catallarchy.net /blog/archives/2004/09/24/theory-of-perfect-competition-bollocks   (882 words)

 The perfect market economy
The perfect market economy model from introductory microeconomics is presented in a concise and graphical way (This exhibition was made by inspiration from Nicholson, W. [1979], Markusen, J. and Bohm, P. The exhibition proceeds as follows.
That is, the marginal rate of transformation (MRT) for all producers (c) and the marginal rate of substitution for all consumers (i) must be identical for each commodity pair (j,j), each commodity -factor pair (j,j), and each factor pair (j,j).
The perfect market economy model introduces the concepts of utility maximization, general equilibrium, substitution at the margin and the concept of social and private efficiency.
www.encycogov.com /B10CompetitionInProductMarkets/App10PerfectMarketModel/Exhi_Perf_market_econ.asp   (1148 words)

 Monopoly/Perfect Competition comparison invalid   (Site not responding. Last check: 2007-10-06)
The total output of a competitively organised industry that employs a million workers, ten to a factory, has to be the same as the total output from a monopoly employing the same number in the one factory.
'Perfect ignorance' is thus required as an adjunct assumption to perfect knowledge, since if consumers were aware of each other, they could collude to lower the market price, while if firms were aware of each other, they could collude to raise it.
Perfect information thus requires consumers to be schizophrenic and irrational supercomputers who devote all their immense processing power to keeping tabs on firms, but who forgo using this formidable apparatus to collude with other consumers to lower the market price.
www.debunking-economics.com /Size/Monopoly_v_pc.htm   (2604 words)

Competition between sellers then amounts to a discovery procedure as sellers learn how to increase their profits, and buyers discover new opportunities for consumption.
Since competition involves the discovery of new opportunities for trade the assumption of perfect information means that "perfect competition" is a situation where all competition is over.
Under perfect competition, competition is an end state where all individuals know who their best potential trading partners are.
www.kean.edu /~dmackenz/comp.html   (1607 words)

 The Flawed Idea of "Perfect Competition" -- 06/17/1999
Perfect competition, the professor likely said, is an essential prerequisite for capitalism.
But even if one still accepts that perfect competition is some sort of ideal to strive for, changes in our economy brought about by computers and the internet are in fact bringing us closer to it.
In conclusion, although the idea of perfect competition is flawed, it turns out that we are getting closer to it all the time anyway.
www.cnsnews.com /ViewCommentary.asp?Page=\Commentary\archive\1998-2000\OPI19990617c.html   (725 words)

Production agriculture is frequently used as an example of an industry with perfect competition; that is, "your wheat can substitute for my wheat." Although this may be accurate for many segments of production agriculture, a question is whether this is changing.
As a result of perfect competition, no one person or business can control price; there is no nonprice competition (e.g., advertising your product does not make a difference; the primary factor influencing who the purchaser is willing to buy from is the price the seller is requesting); and there is limited opportunity for economic profit.
Implication of increasing competition is reduced opportunities for profit from traditional sources (this restates the thought that "firms in perfect competition have limited opportunity to earn an economic profit").
www.ndsu.nodak.edu /instruct/swandal/frm&agbusmgt/ref_topics/PICompetition.htm   (451 words)

 Profit Maximization – Perfect Competition
Perfect competition arises when there are many firms selling a homogeneous good to many buyers with perfect information.
  Under perfect competition, a firm is a price taker of its good since none of the firms can individually influence the price of the good to be purchased or sold.
As the objective of each perfectly competitive firm, they choose each of their output levels to maximize their profits.
www.csun.edu /~hceco008/c8b.htm   (145 words)

 Notes on Competition and Monopol   (Site not responding. Last check: 2007-10-06)
The ideal situation (and most competitive) is an industry with many small firms -- known as the model of perfect competition.
The law is trying to force industries to look like the "ideal world of perfect competition." This is the "public interest" theory of government regulation (the idea that the reason for the regulation is to seek an efficient use of resources).
Competition is also seen as a discovery procedure or process -- in the act of competing we learn what is competitive and what is not competitive (via F. Hayek).
soba.fortlewis.edu /elliott/notes_on_competition_and_monopol.htm   (1312 words)

 Monopolistic Competition
The reason that monopoly and perfect competition are studied in such detail is to understand how the unique qualities of each of these types of market organizations come together to determine the behavior of most U.S. firms.
Monopolistic competition is a mixture of monopoly and perfect competition.
Monopolistic competition is very much like perfect competition in the large number of firms and the absence of barriers to entry.
wps.prenhall.com /bp_casefair_econf_7e/0,8233,2031301-,00.html   (503 words)

 University of St. Thomas - Center for Business Ethics
Since the pharmaceutical industry profits handsomely from the imperfect competition brought on by these interventions, we will argue that the drug prices ought to be "reasonable." In some cases, this might entail that the government regulate pharmaceutical companies as it would a public utility: a lesson that other liberal democracies have already learned.
Under perfect competition, the price a seller receives for its goods or services is, therefore, determined solely on the basis of what the buyers are willing to pay.
On the supply side, imperfect competition, occurs when either a single seller (monopoly) or a group of sellers (oligopoly) operating in collusion, are capable of unilaterally controlling both supply and price of a product or service for which there is no substitute.
www.stthom.edu /cbes/imperfection.html   (3378 words)

Regulation is supposed to guarantee maximum competition to protect consumers against anti-competitive practices like: restraint of trade, collusion, price-fixing, attempts to limit/eliminate competition, attempts to monopolize an industry, etc.
As firms enter the industry, competition increases, total output increases, P* falls (to $6 in this case), and the output for a typical firm declines (from 6 to 5 in this case).
Competitive markets are extremely dynamically efficient; a market economy is flexible, dynamic, resilient and can easily adapt to changing market conditions, technology, demographics, etc. In fact, the market is set to handle change with maximum efficiency, and is actually in a continual state of adjustment, re-optimization, and resource reallocation with various self-adjustment and self-correcting mechanisms.
www.angelfire.com /biz7/mgt402/Chapter_8.htm   (3769 words)

 Pure and Perfect Competition: An Unrealistic and Mistaken Ideal
True competition is a process, not a structure, in which a profit-seeking company, operating with limited information, attempts to coordinate production and distribution with the desires of potential customers.
Competition in a free market includes the process of observing and adjustment under conditions of uncertainty involving both cooperation and rivalry.
According to George Reisman, the Platonic ideal of pure and perfect competition has been derived from an ideology that is based on the collectivist view that the individual human person is subservient to a greater entity—Society, the State, or Mankind.
rebirthofreason.com /Articles/Younkins/Pure_and_Perfect_Competition_An_Unrealistic_and_Mistaken_Ideal.shtml   (634 words)

 [No title]
Unlike perfect competition, we can graph the firm and industry on a single graph, because the firm is the industry.
When the monopolist's MC is equal to the competitive industry's supply curve and demand is the same in both industries, the monopolist produces 55,555.56 and charges $138.89/unit compared to 100,000 units at $50/unit when the competitive industry was in long run equilibrium.
With monopolistic competition, one firm's behavior affects the other firms in the industry, but there are so many firms, and conditions are so dynamic, that it is virtually impossible to trace interactions between firms.
web.nps.navy.mil /~brgates/documents/macronotes/perfect-imperfectcompetition.doc   (5675 words)

 Perfect Competition Introduction
A perfectly competitive industry is highly unlikely to exist in its entirety given the strong assumptions made about the operation of the market.
All markets are “competitive” to one degree or another, but the vast majority of markets are characterised as “imperfectly competitive”.
The threat of competition should lead to a faster rate of technological diffusion, as firms have to be responsive to the needs of consumer.
www.tutor2u.net /economics/content/topics/monopoly/perfect_competition.htm   (828 words)

 The Theory of the Firm - Perfect Competition - Economics & Politics   (Site not responding. Last check: 2007-10-06)
In perfect competition, all firms are separate and independent from each other - Each firm operates as an individual enterprise looking only to its own best interests.
Perfect competition is an extreme situation in which competition is as strong as it could ever possibly be.
The point of this hypothetical market is to show, as clearly as possible, the effects of competition upon a supplier.
economics.informbank.com /articles/economic-theory/theory-firm-perfect-competition.htm   (638 words)

 perfect - Definitions from Dictionary.com
Since its earliest use in the 13th century, perfect has, like almost all adjectives, been compared, first in the now obsolete forms perfecter and perfectest, and more recently with more, most, and similar comparison words: the most perfect arrangement of color and line imaginable.
Perfect is compared in most of its general senses in all varieties of speech and writing.
By the same token, perfect often means "ideal for the purposes," as in There could be no more perfect spot for the picnic, where modification by degree makes perfect sense.
dictionary.reference.com /browse/perfect   (936 words)

 Graziadio Business Report - Marketing & Perfect Competition
Finally, she would talk about something she called "perfect competition." In this market structure there were many small firms selling identical products for identical prices.
One of the assumptions of a perfectly competitive market is that there are no transaction costs incurred when buying in one market and selling in another; that is, prices are identical.
Even price cannot be used competitively in a perfectly competitive market since any price reduction would result in an immediate matching of the reduction by competitors and any attempt to increase price would result in zero sales since customers could get the identical product at a lower price elsewhere.
gbr.pepperdine.edu /002/competition.html   (1716 words)

 Class Notes - Monopoly and Perfect Competition Compared
Either (1) perfect competition is not as efficient as thought OR (2) monopoly is not as inefficient as thought.
However, the threat of competition will generally be sufficient to prevent the firm from raising the price to the monopoly level and reducing the quantity produced to the monopoly level.
In contrast to perfect competition, monopolists have no competitors because of the existence of barriers to entry.
courses.missouristate.edu /ReedOlsen/courses/eco165/Notes/pc-m.htm   (3527 words)

 Economics Basics: Monopolies, Oligopolies and Perfect Competition
This means that we have competition in the market, which allows price to change in response to changes in supply and demand.
Perfect competition is characterized by many buyers and sellers, many products that are similar in nature and, as a result, many substitutes.
Perfect competition means there are few, if any, barriers to entry for new companies, and prices are determined by supply and demand.
www.investopedia.com /university/economics/economics6.asp   (664 words)

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