Question

Jeremy is an entrepreneur and wants his company to be the best possible. He wants to know which market structure is best for companies and has hired you to advise him.

Which market structure benefits companies the most? Briefly discuss with reasons.

Answer 1

perfect competitive market is more market structurally best.

because, 1) in perfect competitive market, there are many number of sellers and buyers which turns the market into most efficient market.

2) in this, consumers have full knowledge of the product which again makes it effiecient.

3) no price discrimination is done in this market.

.4) there are no barriers to entry and exit by the firms in this market as if firms are earning losses then it may exit the firm easily and if firms are earning super profits then more firms can enter into the industry also.

AS, monopoly market may maintain a supernormal profit in long run, but it is not mandatory because it may leads to loss also in the long run.

but in the case of perfectly competitive market, each firms earns a zero economic profit in long run also.