Page 162 - DECO405_MANAGERIAL_ECONOMICS

Unit 9: Market Structure – Perfect Competition

process and shopping experience. The uniform entry of shopper, customer and Notes
client information is as important to your business as a uniform and consistent new
bicycle assembly process and check list.

9. Become an efficient direct-response marketer. Staying connected to prospects,
shoppers, customers and clients utilizing a regular direct-response marketing plan,
is essential to growing the number of transactions generated by the business, and it
is reliant upon a clean and current database.
10. Follow the Phillips Rule of never ever selling anything in your retail store below
your cost of doing business. This will lead to consistently earning excess profits.
All ten of these suggestions together create the foundation for a new level of specialty
bicycle retailing that changes the paradigm and has the potential to take the retailers that
follow it out from under the state of perfect competition that the rest of the channel of
trade is trapped in.

Question
Comment on the suggestions made by the writer.
Source: http://www.jaytownley.com/the-bicycle-industry-competition?page=4

9.4 Summary

In theory, perfect competition implies no rivalry among firms.
In a perfectly competitive market structure there is a large number of buyers and sellers of
the product and the product is homogeneous.
There is free mobility of factors of production and the buyers and sellers have perfect
knowledge of the market.
In the short run the best level of output of the firm is the one at which the firm maximises
profits or minimises losses. This is possible at P = MR = MC. The point at which the firm
covers its variable costs is called "the closing down point".
In long run the best level of output is one at which price P=LMC. At equilibrium the short
run marginal cost is equal to the long run marginal cost and the short run average cost is
equal to the long run average cost. Thus, given the above equilibrium condition, we have
SMC = LMC = LAC = SAC P = MR

9.5 Keywords

Equilibrium: Condition when the firm has no tendency either to increase or to contract its
output.
Minimum price: Price at which the sellers refuse to supply the goods at all and store it with
themselves.
Perfect competition: A market structure characterized by a complete absence of rivalry among
the individual firms.

Profit: Difference between total revenue and total cost Market period: A very short period in
which the supply is fixed, that is no adjustment can take place in supply conditions.

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