This condition is important to the idea of perfect competition because unless there is totally free entry of firms into the market, presence of a great deal of companies cannot be ensured. If they so desire, this implies that the old companies can leave the market.
Thus, in the short period, the number of companies remains constant as nobody can be available in and nobody can go out.
However, after being bought by two lawyers, the environment is bound to change as the competitive market changes in structure.
The preceding scenario is an example of an imperfect competitive market referred to as monopolistic competition.
Perfect competition is a market structure where lots of companies provide a uniform item.
Doctoral Thesis Tribunal - Perfect Competition Versus Monopoly Essays
Due to the fact that there is flexibility of entry and exit and perfect information, companies will make regular revenues and prices will be kept low by competitive pressures.
Perfect competition describes a market structure where competition is at its biggest possible level.
To perform it more clear, a market which displays the following characteristics in its structure is stated to show perfect competition.
The number of firms or sellers needs to be so huge that output of each firm producing at the minimum point of its long- run average cost curve is just a little portion of the overall output of the industry.
The implication of this condition of huge numbers is that no firm can affect the market cost by modifications in its output since output of each company is only an extremely small fraction of the total market supply.