In a perfectly competitive market, price will be equal to the marginal cost of production. However, the theoretical efficiency of perfect competition does provide a useful benchmark for comparing the issues that arise from these real-world problems.
Now, consider what it would mean if firms in that market produced a lesser quantity of flowers. In other words, the gains to society as a whole from producing additional marginal units will be greater than the costs.
Perfect competition, in the long run, is a hypothetical benchmark. For market structures such as monopoly, monopolistic competition, and oligopoly, which are more frequently observed in the real world than perfect competition, firms will not always produce at the minimum of average cost, nor will they always set price equal to marginal cost.
The concept of a market structure is therefore understood as those characteristics of a market that influence the behaviour and results of the firms working in that market.
Thus, a homeless person may have no ability to pay for housing because they have insufficient income. For society as a whole, since the costs are outstripping the benefits, it will make sense to produce a lower quantity of such goods.
Thus, these other competitive situations will not produce productive and allocative efficiency. Converging prices. The interaction and differences between these aspects allow for the existence of several market structures, from which we can highlight the following: — Perfect competition : the efficient market where goods are produced using the most efficient techniques and the least amount of factors.
They are… too perfect to be true. Sellers will have to deal with the increased negotiating power of the only few buyers in the market, the oligopsonists.