If real world markets can be made to resemble more closely the model :: Economics

If real world grocery stores can be do to resemble more closely the model of completed opposition, frugal readiness entrust improve. Explain why Perfect competition is broadly regarded as stintingally more efficient?Chris Simons============If real world markets can be made to resemble more closely the modelof perfect competition, economic efficiency will improve.a) Explain why Perfect competition is generally regarded aseconomically more efficient? (20 marks)The model of perfect competition describes market where there is ahigh degree of competition. The word perfect does not mean that thisform of competition produces ideal results or maximises economicwelf atomic number 18 in other words, the word perfect should not produce anynormative overt nonpareils.A perfectly competitive market moldiness(prenominal) possess four characteristics.Firstly, there must be many buyers and sellers in the market, none ofwhom is pear-shaped enough to influence price. Buyers and sellers are s aidto be price takers. This type of market has many relatively small steadys that go forth goods to a large number of small buyers.There must be freedom of entry and exit from the industry. Firms mustbe able to institute themselves in the industry easily and quickly.Barriers to entry must therefore be low. If a firm wishes to ceaseproduction and leave the market, it must be free to do so.Buyers and sellers possess perfect knowledge of prices. If one firmcharges a higher price than the market price, the demand for itsproduct will be zero as buyers buy elsewhere in the market. whence thefirm has to accept the market price if it wishes to sell into themarket (i.e. it must be a price taker).All firms must produce a homogenous product. There is no branding ofproducts and products are identical.There are very few industries in the world that approximate to thiskind of market structure. One that might is agriculture. Inagriculture there is a large number of farmers supplying the market, none of whom is large enough to influence price. It is unproblematic to buy afarm and set up in business. It is equally easy to sell a farm andleave the industry. Farmers on the completely possess perfect knowledge.They know what prices prevail in the market, for instance from the domain press. Finally farmers produce a range of homogenous products.King Edwardss potatoes from one farm are indistinguishable from KingEdwardss potatoes from another. In Europe and in many countriesaround the world, farming is in certain instances not a perfectlycompetitive market. This is because governments may interfere in themarket, buying and interchange to fix a price.Perfect competition is generally regarded as economically more