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ECN607 – Lectureaid_6.1

ECN607 – Lectureaid_6.1 - ECN607 Managerial...

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ECN607 – Managerial Economics Study Aid: lecture 6.1 Introduction Perfect competition and monopoly represent forms of market structure. Features of each market structure are discussed here, with particular focus on the nature of their demand curves and in determine their respective profit-maximizing rate of output. Characteristics of a Perfectly Competitive Market Structure A market structure where the decisions of buyers and sellers have no effect on market price is considered perfect competition. The price of the product cannot be significantly influenced because the firm is small. The following are characteristics of perfect competition: Large number of sellers and buyers Homogeneous good Easy entry into and out of the market Market participants have full information Market conditions are constantly changing; however, equal access to information is difficult to come by. McGahan (2004) suggests that companies misinterpret market mechanisms on a consistent basis.
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