(BQ) Part 2 book "Microeconomics - Principles & applications" has contents: Monopolistic competition and oligopoly, labor markets, capital and financial markets, economic efficiency and the competitive ideal, government’s role in economic efficiency,.and other contents. | CHAPTER 9 Perfect Competition W hen we observe buyers and sellers in action, we see that different goods and services are sold in vastly different ways. Consider advertising. Every day, we are inundated with sales pitches for a long list of products: toothpaste, perfume, automobiles, cat food, banking services, and more. But not everyone advertises what they have for sale. Farmers don’t advertise when they want to sell their wheat or corn. Nor do shareholders or bondholders advertise when they want to sell stocks or bonds. Why, in a world full of advertising, don’t the sellers of wheat, shares of stock, corn, crude oil, copper or foreign currency advertise what they are selling? Or consider profits. Anyone starting a business hopes to make as much profit as possible. Yet some companies—Microsoft, Quaker Oats, and PepsiCo, for example—earn sizable profits for their owners year after year, while at other companies, such as Delta Air Lines, Ford, and most small businesses, economic profit may fluctuate from year to year, but on average it is very low. When economists turn their attention to these observed differences in trading, they think immediately about market structure, the subject of this and the next two chapters. We’ve used this term informally before, but now it’s time for a formal definition: Market structure The characteristics of a market that influence how trading takes place. By market structure, we mean all the characteristics of a market that influence the behavior of buyers and sellers when they come together to trade. In microeconomics, we can divide markets for goods and services into four basic kinds of market structure: perfect competition, monopoly, monopolistic competition, or oligopoly. The subject of this chapter is perfect competition. In the next two chapters, we’ll look carefully at the other market structures. What Is Perfect Competition? The phrase “perfect competition” should sound familiar, because you encountered it earlier, in .
