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Tuesday, February 11, 2014

Why is perfect competition sometimes regarded as an ideal market structure and why does Samuelson write that it doesn't faithfully represent the facts about modern industry?

Perfect argument sometimes is regarded as an ideal foodstuff place organize because it supports the actual ideology of a disengage market frugality where, for example there is no governance intervention. The entrepreneur in blameless competition whole kit out and caboodle independent of other entrepreneurs and all(prenominal) individual buyer or seller does not bias the market, there are holy substitutes for all goods and the demand is abruptly elastic, hence there is no price rise or fall. As should be, there is a freedom of entry and expiration of unswervings. Both the consumers and producers lease a immaculate knowledge of market see to its. The demand burn is equal to the marginal revenue curve meaning that the firm sells whatever it produces and there is no instrument tax. Having MR=MC, the firm makes as much profit as possible. Perfect competition is the just about stable market form, and hence the most desirable. It leads to the go slightly possible e fficiency for the firm. It industrial plant best for both the buyers and sellers and works in accordance to each persons needs and abilities. It is a mark off where each market should be and is used as a model to understand and predict real life situations. However, Samuelson writes that perfect competition does not faithfully represent many of the facts slightly modern industry because life in the economic introduction can neer be perfect. There can never be a market fuddled to having perfect conditions for competition. It is certain that many markets, such as the ones for raw materials come next to being in perfect competition, they can never in truth achieve perfect competition. This is due to many factors but specially the dissatisfaction of the characteristics of a perfect competition market as set forth above. As soon as a firm in a perfect competition decreases its price, it enters the realm of imperfect... If you want to have a full essay, order it on our websi! te: OrderCustomPaper.com

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