What is a perfect competition market structure?

1 Answer
Jul 27, 2015

A perfect competition is a market structure in which there are many buyers and sellers and all firms are price takers. One can easily enter and leave the market.


Since there are many companies in this market, they all have to sell at the market price (which is determined by the market forces). If one tries to sell above the market price, they won't sell a single unit and there is no reason to sell under that price. That means every firm will take the market price as given, that is, they're all price takers.
Also, anyone could easily enter or leave this market without having special costs.
For an example, you can think of the soy market. It is not completely perfect, but the farmers must sell at the prices fixed in the financial market and anyone can easily start or stop producing this product.