Question

Does a Perfectly Competitive Industry Exist?

There are really no industries that meet all of the criteria for perfect competition. But there are some that come very close. I want you to review the criteria for perfect completion and select an industry that you feel comes close to being perfectly competitive. In addition to the name of the industry I want you to list the criteria you feel it satisfies.

Answer 1

A perfectly competitive market has several features that are not found in real world markets. Firstly, perfect information is available to a large number of buyers and sellers at no additional cost. This helps them because then, they are able to negotiate at a price equally acceptable by both of these parties. This equilibrium price is the one at which they exchange goods and services in equal amount. These goods and services are identical, and no single seller or buyer can influence the negotiated price determined by the market forces. There can be short run economic profits for a seller, but costless entry and exit makes it impossible for any firm to earn any economic profit in the long run There can be other examples as well such as the wheat market. Farmers selling wheat are large in number, offering a same quality wheat at an almost similar price to a large number of buyers. The stock market can also be considered close to a perfectly competitive market. There are different stocks of different companies indicating that buyers and sellers are large in number. No individual buyer or seller can influence the price of a stock to a given extent. However, the role of information in this market is radical relative to other markets.