Perfect competition denotes a market setting in which all companies deal with a similar product and cannot control the price of the commodities. Since market share does not affect price, the consumers have a great influence as they have adequate information concerning products and costs in each firm (Azevedo & Gottlieb, 2017). Moreover, in perfect competition, resources such as labor are completely mobile and companies can venture into or exit the market with no cost.
Most agricultural and metal markets embrace perfect competition. This ideally signifies that a homogenous product is manufactured by and for different customers and sellers, who are knowledgeable about prices. In perfect competition, the high number of sellers generates a situation where one company does not have the strength to sway total supply to a level that is substantial enough to permit it to make changes in market prices. In this aspect, the connection between demand and supply is what establishes the market price.
Perfect competition is contrary to a monopoly where just one organization supplies commodities or services and can set the prices that it deems fit. This is because consumers do not have another option and it is hard for likely competitors to thrive in the market.
Monopolistic markets are exceedingly rare and perhaps not possible without absolute hindrances to entry, for example, a ban on competition or exclusive control of the existing natural resources (Benyettou, 2015). An oligopoly market creates a structure in which just a handful of companies dominate. Such a market is considered greatly concentrated as it is shared by a few organizations (Amir, Gama, & Werner, 2018). Nevertheless, many small companies may operate in an oligopoly market but are not dominant.
References
Amir, R., Gama, A., & Werner, K. (2018). On environmental regulation of oligopoly markets: Emission versus performance standards. Environmental and Resource Economics, 70(1), 147-167.
Azevedo, E. M., & Gottlieb, D. (2017). Perfect competition in markets with adverse selection. Econometrica, 85(1), 67-105.
Benyettou, M. (2015). Price optimization of cloud computing service in a monopolistic competitive market. Multiagent and Grid Systems, 11(4), 259-271.