Perfect Competition: Zero control over price

Perfect competition is a market structure in which there are many buyers and sellers, and all firms in the market are price takers. In this market structure, no individual firm has control or influence over the price of the product. The price is determined solely by the forces of supply and demand in the market.

Key features of perfect competition:

1. Large number of buyers and sellers: There are numerous buyers and sellers in the market, none of which can individually influence the market price.

2. Homogeneous product: The products sold by all firms in the market are identical or very similar, creating a perfect substitute for consumers.

3. Perfect information: Buyers and sellers have complete information about the market, including prices, quantities, and quality of products.

4. Free entry and exit: Firms can freely enter or exit the market without any barriers. This ensures that there are no long-term abnormal profits or losses in the long run.

Zero control over price:

In perfect competition, individual firms have no control over the price of the product. They have to accept the prevailing market price as determined by the intersection of the market demand and supply curves. This is because each firm's output is a small fraction of the total market output, and any attempt to raise the price would result in a significant loss of customers to other firms.

In a perfectly competitive market, the demand curve faced by each firm is perfectly elastic, meaning that the firm can sell as much as it wants at the prevailing market price, but it cannot sell at a higher price. If a firm tries to set a higher price, buyers will immediately switch to other firms offering the product at a lower price, resulting in zero sales for the firm.

Therefore, in perfect competition, the control of the firm over the price is nil. The firm has to accept the price determined by the market and adjust its quantity of output accordingly. The only decision a firm can make in perfect competition is to determine the optimal quantity to produce based on its cost structure and the prevailing market price.