Competitive Market -> Advantages of Small Firms

Apuntes

• Subtopic: What is a Competitive Market? A competitive market is characterized by the rivalry among firms trying to sell goods in a particular market (e.g., Prime Shibilling vs. Prime LeDollar). In some markets, there is a lot of competition, such as in the market for milk in Australia. However, in other markets, there is very little competition, like the yacht market. Competitive markets typically exhibit several common features: - A large number of buyers and sellers. - The products sold are close substitutes for each other. - Low barriers to entry, meaning that it is fairly easy to enter the market. - Firms have almost no control over the prices charged. If a firm tries to charge more than its competitors, it is likely to lose business. - Free flow of information about the nature of the products sold, availability at different outlets, prices, methods of production, and the cost and availability of production factors. • Subtopic: Competition and the Firm Generally, firms do not welcome competition; most would prefer to dominate the market and operate without the threat of rivals. Without competition, firms can usually charge a higher price with no repercussions...