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Managerial Economics by Donald N. Stengel

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Why Perfect Competition Usually Does Not Happen

The perfect competition model (and its variants like monopolistic competition and contestable markets) represents an ideal operation of a market. As we noted in chapter 6, not only do the conditions of these models encourage aggressive competition that keeps prices as low as possible for buyers, but the resulting dynamics create the greatest value for all participants in the market in terms of surplus for consumers and producers.

Some markets resemble perfect competition more than others. Agricultural markets, particularly up through the beginning of the 20th century, were viewed as being close to a real-world version of a perfectly competitive market. There were many farmers and many consumers. ...

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