PROJECT ON PERFECT

COMPETITION
Presented By –
Aditi Khot
Murtuza Hasan
Sandeep Nagpal
Manish Telavane
Payal Vadgama
TYPES OF MARKET STRUCTURE
 Monopoly
 Oligopoly
 Dominant Firm
 Monopolistic Competition
 Perfect Competition
PERFECT COMPETITION
 The concept of competition is used in two
ways in economics.
 Competition as a process is a rivalry among
firms.
 Competition as the perfectly competitive market
structure.
A PERFECTLY COMPETITIVE
MARKET •A perfectly competitive
market is one in which
economic forces operate
unimpeded.

•Many firms, all making

the same product. Each
firm’s output level is very
small relative to the total
output level.
 ASSUMPTIONS:
 There are many buyers and sellers,
each firm is a price-taker.
 Identical output produced by each firm –
homogeneous products that are perfect substitutes
for each other.
 All firms (industry participants and new entrants)
have equal access to resources (e.g. technology)
 No barriers to entry & exit of firms in long run – the
market is open to competition from new suppliers.
 No externalities in production and consumption
Hypothesis:

Each Seller is Perfect Competitor and Each Buyer is the King.

LINKING ROAD -
MANY BUYERS AND MANY SELLERS
LINKING ROAD – IDENTICAL PRODUCTS
AND PERFECT SUBSTITUTES
 DETERMINING PROFITS
GRAPHICALLY
Price MC Price MC Price MC
65 65 65
60 60 60
55 55 55
50 50 50 ATC
45 45 ATC 45
40 D A P = MR 40 40 Loss P = MR
35 35 35
30 Profit 30
P = MR 30
B ATC AVC
25 C AVC 25 AVC 25
20 E 20 20
15 15 15
10 10 10
5 5 5
0 0 0
1 2 3 4 5 6 7 8 9 1012 1 2 3 4 5 6 7 8 9 1012 1 2 3 4 65 7 8 910 12
Quantity Quantity Quantity
(a) Profit case (b) Zero profit case (c) Loss case
THE SHUTDOWN DECISION

MC
Price
60

50 ATC

40 Loss
P = MR
30
AVC
20
$17.80 A
10

0
2 4 6 8 Quantity
 CONCLUSION
Price-takers market.

Homogeneous products that are perfect substitutes?

All firms have equal access to resources

(e.g.technology)

Free entry & exit of firms

No externalities in production and consumption