Advanced English Dialogue for Business – Perfect competition

Listen to a Business English Dialogue About Perfect competition

Emily: Hi Amelia, have you heard about perfect competition in business and finance?

Amelia: Yes, I think it’s a market structure where many small firms produce identical products and have no control over the market price.

Emily: That’s correct. In perfect competition, entry and exit into the market are easy, and there are no barriers to entry.

Amelia: How does perfect competition affect prices?

Emily: In perfect competition, prices are determined by the forces of supply and demand, with firms being price takers rather than price setters.

Amelia: Are there any examples of industries that resemble perfect competition?

Emily: Yes, agricultural markets like wheat or corn often resemble perfect competition because many small farmers produce identical products.

Amelia: Can firms in perfect competition earn economic profit in the long run?

Emily: No, in the long run, economic profit tends to zero due to free entry and exit of firms, which drives prices down to the minimum average total cost.

Amelia: How does perfect competition benefit consumers?

Emily: Perfect competition leads to lower prices for consumers due to intense competition among firms.

Amelia: What role does product differentiation play in perfect competition?

Emily: In perfect competition, products are homogeneous, meaning there’s no differentiation between them.

Amelia: Thanks for explaining, Emily. Perfect competition sounds like an interesting market structure.

Emily: No problem, Amelia. It’s a fundamental concept in economics that helps us understand how markets function efficiently.