Question

Module 4 - Discussion

Give an example in the marketplace that describes the principles of the free market (perfect competition) and competition.

Post your response and then read and reply to classmates' posts.

Answer 1

A free market structure and competition is determined by the market forces acting together to bring market equilibrium . Whereby there is no intervention in the market . There are number of firms , each producing homogeneous products , no firm is a price maker . There is free entry and exit for firms and all firms make normal profits in long run . On real world example would be stock exchange market or market for gold . Here all buyers have same information , there are numerous buyers , both buyers and sellers decide on the price , everyone can freely enter and exit the market .