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Wednesday, July 24, 2019

Market Structure Essay Example | Topics and Well Written Essays - 3500 words

Market Structure - Essay Example Characteristics of Perfectly Competitive Market In a perfectly competitive market, a large number of buyers are willing to buy products and services at a certain price level and a large number of sellers are willing to sale those products and services for the specified price level. All firms are price taker in perfectly competitive market, having a relatively small market share and operating in a profit maximization motive. Profit is maximized in that point where marginal revenue meets marginal cost (Stackelberg, Bazin, Hill and Urch, 2010). There are no barriers to entry and exit for firms into the industry. All factors of production are perfectly mobile in long run perfect competition. Complete information is available to the consumers in terms of product quality, method of production, price of competitors. Purchasing behaviour of the buyers is rational as all information is available to them. Market cannot be affected by any externalities. Buyers are well aware about their market rights. Therefore, no cost of benefit can influence one party to harm the other party. Firms are engaged in producing homogeneous goods which are hardly differentiated in terms of price level and quality. Economies of scale is absent in this market structure as a result of continuance of a large number of buyers and sellers. There is no transaction cost is perfect competition. Hence no cost is involved in exchanging goods in this type of market structure. Local fish or vegetable market is a perfect example of this kind of market structure (Stackelberg, Bazin, Hill and Urch, 2010).

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