Summary of Pure Competition
There are four major types of markets. They are: Pure Competition: Large number of buyers and sellers trading a standardized product (corn, wheat); Pure Monopoly: One seller, firm is the industry; Monopolistic Competition: Large number of buyers, large number of sellers each selling a similar but slightly differentiated product (cigarettes); Oligopoly: Very few sellers that acknowledge that decision of one firm affects the others and takes this fact into account when making production or pricing …
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…can be consumed by everybody (public goods). In some industries the minimum point of the ATC curve of a firm can only be reached at a high level of production. In such industries only a few firms can be supported (utilities etc.). One of the assumptions of competition is that products are standardized. But consumers may value differentiation in products. Hence the P = MC decision may not reflect the benefit to society from product differentiation.
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