The perfectly competitive model is not very useful for managers because very few

Question

The perfectly competitive model is not very useful for managers because very few markets are perfectly competitive.” Do you agree with this statement? Explain. Regardless of whether you agree, what lessons can managers learn by studying perfectly competitive markets? b) Explain why the demand curve facing a perfectly competitive firm is assumed to be perfectly elastic (i.e., horizontal at the going market price). c) How does one determine whether a market is oligopolistic? Is it important for managers to recognize the existence of oligopolistic competitors in the markets in which their companies operate? Explain. d) Suppose you are a purchasing manager for an electronics equipment firm. Your job is to obtain component parts at the best cost from several suppliers and to make sure those parts are received in a timely fashion. If you consider your job as a game, is it a cooperative or noncooperative game?

Explanation / Answer

No. There are many markets that are perfectly competitive. There are various day to day interactions market where we see perfect competition such as the street vending market, the fruits and vegetables market etc. There are various lessons that one can learn from the perfectly competitive market. First of these is the cost minimization and loss minimization. Even the firm is in loss in the short run it operates to minimize loss and cover its operating cost. This is the shut down rule where the firm produces enough to cover operating cost.

Two, the allocative and the productive efficiency in the perfect competitive markets.

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