Homogenous or perfectly standardized commodity

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Using the three characteristic of a perfectly competitive market (p. 396), analyze the market in which your company operates. Address each characteristic. Does is meet these requirements? If so, how? If not, why not?

1. Perfectly competitive firms are price-takers because each individual firm in the market is so small relative to the total market that if cannot affect the, market price of the good or service it produces by changing its output. Of course, if all producers act together, changes in quantity will definitely affect market price. But if perfect competitive prevails, each producer is so small that individual changes will go unnoticed.

2. All firms produce a homogenous or perfectly standardized commodity. The product of each firm in a perfectly competitive market is identical to the product of every other firm. This condition ensures that buyers are indifferent as to the firm form which they purchase. Product differences, whether real or imaginary, are precluded under perfect competition.

3. Every into and exit form perfectly competitive markets are unrestricted. There are no barriers preventing new firms from entering the market, and nothing prevents existing firms from leaving a market.

Reference no: EM13893911

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