When there is a large number of sellers and a large number of buyers in a market, that market is regarded as a perfectly competitive market or industry. In a perfectly competitive market, a single firm cannot dictate the pace and the selling price (Khan Academy, n.d.). In other words, one firm cannot set the prices and the competitors are obligated to market prices. What is fascinating about a perfectly competitive industry is that barriers that prevent new firms from entering the industry are flexible; that means, there are minor barriers of entry as well as little or no barriers to exit (Rittenberg & Tregarthen, 2009). In view of this, the following items will be classified as a perfectly competitive market and a non-perfectly competitive market.
Coca-Cola and Pepsi Not perfectly competitive- With the knowledge of what we know about a perfectly competitive industry and a monopoly market, Coca-Cola and Pepsi would not fit into a perfectly competitive industry. This is because the barriers to entry into the industry are relatively high for new firms and that the ATC and AVC for a new firm are relatively high compared to the two large soft drink manufacturers because of economies of scale. Additionally, not many firms in their industry produced the same or identical product to make the industry competitive. Therefore, the assumption that Coca-Cola and Pepsi are most likely not to be produced in a perfectly competitive industry is reasonable.
Potatoes
Perfectly competitive—