According to the principles of microeconomics market structures can be identified as perfect competition, oligopoly or monopoly. In our society today and the way business is conducted, market structures are not strictly defined by on of these particular types. They can be composed of a mix of them. A market structure that has a higher level of competition can be more efficient than those that have lower levels of competition. We know this since lower competition increases the producer’s surplus; in return it decreases the consumer surplus. The loss in the consumer’s surplus is means it will be greater than the increase in the producer’s surplus. This leads to what we have learned as a deadweight loss. A perfect competitive market can also be thought as the most efficient form of market, where consumers are the most beneficial. Realistically it is difficult to identify and choose a perfect competitive market. Perfect competitive markets have the following characteristics: * No entry or exit barriers: These markets should have their structures set up with no entry or exit barriers. Simply meaning that new suppliers can invest in their company without any significant capitol or risk. They can also exit the industry without facing any significant loss. *Infinite buyers and sellers: the markets have unlimited or infinite amounts of producers that are willing to sell their products to an unlimited or infinite amount of buyers. This is to ensure that there is no supplier or buyer has a significant market share. This is to prevent others in the market from being able to determine the market price. *Perfect Information: This is when all competitors in the market have to provide and share equal information among/between each other. Suppliers and buyers alike, go forward and profit from having full and complete information, just like the other suppliers and buyers in the markets.
The above conditions benefit consumers as these firms develop and become price takers. The...
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