Although very few industries meet every characteristic of perfect competition, the perfectly competitive model is important because it sets the standard for efficiency that is used to measure performance in other industries. The extent to which an industry fails to meet the criteria for perfect competition is an indicator of how much it fails to efficiently use and allocate resources.
In this Discussion, you will identify an industry and one or more of its characteristics that fail the test of perfect competition. You will explain the implications in terms of output and pricing decisions.
To prepare for this Discussion:
- Review this week’s Learning Resources, focusing in particular on the information on perfectly competitive industries and how firms behave in them.
- Think of an industry that has several characteristics of perfect competition—but not all of them.
- Review the Academic Writing Expectations for 1000-Level Courses, provided in this week’s Learning Resources.
By Day 3
Post a 150- to 225-word (2- to 3-paragraph) explanation of perfect competition at the industry level. In your explanation, do the following:
- Describe your selected industry, and identify characteristics of the industry that are consistent with the definition of perfect competition and those that are not.
- Explain how the industry’s cost structure affects pricing decisions, entry, and exit. Specifically, how similar do you think a firm’s pricing and output decisions would be compared to a perfectly competitive industry?
- To support your response, be sure to reference at least one properly cited scholarly source.