By Gerda MenzelOn Apr 11, 2019 Free Resume
Perfect competition is the opposite of a monopoly, in which only a single firm supplies a good or service and that firm can charge whatever price it wants, since consumers have no alternatives and it is difficult for would-be competitors to enter the marketplace. Under perfect competition, there are many buyers and sellers, and prices reflect supply and demand. Companies earn just enough profit to stay in business and no more. If they were to earn excess profits, other companies would enter the market and drive profits down.
Governments play a vital role in market formation for products by imposing regulation and price controls. They can control entry and exit of firms into a market by setting up rules to function in the market. For example, the pharmaceutical industry has to contend with a roster of rules pertaining to research, production, and sale of drugs.
Information about the ecosystem and competition in an industry constitutes a significant advantage. For example, knowledge about component sourcing and supplier pricing can make or break the market for certain companies.
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