What Is Perfect Competition Promotes Market Efficiencies

Markets are typically divided into four sectors; perfect competition, pure monopolies, monopolistic competition and oligopolies. There are two factors that influence which sector an industry fits into, one being the number of competing firms and the other being barriers to entry. Commensurate with these are different pricing options and strategies undertaken by various firms to reach optimal profit maximization. Altogether, each market contains specific intricacies which effect supply and demand and ultimately management’s response to each. Competition fuels growth, and while one market might regulate competition by its very nature, other markets must carefully weigh the cost of competition and what other firm’s reactions to it might be. Regardless of which market a business fits into, managers ultimately care about profit maximization which occurs at different levels defined by supply and demand. The following discussion highlights differences between each segment and how management must interact with the market in order to succeed. A market in which perfect competition occurs provides many unique characteristics favoring both manufacturers and customers. This purely hypothetical notion of perfect competition promotes market efficiencies primarily through â€Å"delivering satisfactory levels of good and services at minimum cost to consumers who are most willing and able to pay for them.† (Samuelson Marks, Managerial Economics, 2015) The creation of this market categoryShow MoreRelatedAllocative Efficiency and Dynamic Efficiency1114 Words   |  4 PagesEfficiency is to fulfil the needs and wants of consumers by making optimal use of scarce limited resources. There are several meanings of efficiency and all are linked to how well a market shares scarce resources to satisfy consumers. 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