(a) firms that sell identical products
(b) price takers for all firms
(c) all firms that have a relatively market share
(d) the industry is characterized by freedom of entry and exit
(e) the nature of the products and the prices charged by each firm is known by the buyers
Perfect competition consists of infinite sellers and buyers. These sellers will be supplying homogeneous products to the consumers. Since there are many sellers, the prices of the products would be almost fixed. So, the sellers have to follow the strict market rules which exist. The competition existing between the sellers in the perfectly competitive market is totally impersonal. Hence, it is the ideal one. The supply of homogeneous product ensures that the products are available for the consumers whenever they wish to buy them and there is no hoarding and illegal practices. Perfect competition is the best market structure to protect the interests of the common consumers. Profit maximisation is the main aim of the sellers in a perfectly competitive market. Because of many sellers, the market share of each seller automatically reduces in a perfectly competitive market. This gives them freedom to enter and exit from the market whenever they wish.
Perfect competition in farming
From ABC News, deals with the strawberry crop in Florida. Due to the unusually cold weather in January of 2010 the strawberry crop ripened all at once. Normally the crop ripens and goes to market over a 6 to 8 week period. With so many strawberries ripening at the same time, the price of strawberries fell from one dollar per pound ($2.20 per kilogram) to $.25 per pound and because of this, farmers destroyed their crops instead of picking them. People interviewed by ABC news believe the strawberry farmers were just being selfish and that their actions were absolutely senseless. Farmers also wouldn't allow people to come onto their land to pick strawberries, preferring instead to dig them up and throw them away. There is no indication in the article that strawberry farmers are going to plant a different crop for next year.
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