Advantages And Disadvantages Of Pure Competition

1.0 INTRODUCTION

All business confront two substances which implies nobody is requited to purchase their items or even client who many need those items may purchase from different organizations. Firms that work in pure competition markets confront this reality. In this section, we will figure out how such firms settle on choice about the amount to create, how much benefit they make, regardless of whether to remain in business or not, and numerous others. Business contrast from each other as far as what number of merchants there are in a particular market, how simple or troublesome it is for another firm to enter, and the kind of items sold. This is otherwise called the market structure of the business.

2.0 CONTENT

MARKET STRUCTURES

PURE COMPETITION

Pure competition is a term that describes a market that has a broad range of competitors who are selling the same products. It is also often referred to

- Since firms are price takers in pure competition, demand for a firm is horizontal which means they are perfectly elastic.

- Therefore, demand equals to marginal revenue and also equals to average revenue and the price.

PROFIT MAXIMIZATION IN PURE COMPETITION

In economics, profit maximization is the short run or long run process by which a firm determines the price and output level that returns the greatest profit. There are few approaches to this problem. There are two ways to calculate the profit maximizing output quantity.

The first way is using the total approach. The total approach implies that profit is equal to total revenue (TR) minus total cost (TC). Using a table, we can directly minus total revenue and total cost. The profit maximizing output is when the difference between total revenue and total cost is the highest. By using a graph, the maximizing output is obtained where the vertical distance is the