Why Is Perfect Competition Often Described As The Ideal Market Structure? Compare And Contrast With Other Known Market Structures.
Ideal concepts, when implemented into the real world, very often fail to survive. The perfectly competitive market structure is not an exception. The model is based on such strict assumptions that its adaptation into everyday life situations, in most cases, is simply impossible; however it is often described as the ideal. In the long-run, when all the factors of production can vary, given that the maximalisation of earnings is a natural goal behind every firm’s activities, only under the perfectly competitive market’s conditions, is a firm able to reach optimum revenue and, at the same time, be totally efficient. To fully understand this phenomenon it’s necessary to first define productive and allocative efficiency in order to clearly recognize the conditions under which both of them can be achieved. Next, we should focus on how perfect competition differs from monopolistic competition, oligopoly and monopoly. This will allow us to see to what extent a firm’s resources......
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