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.