Marginal revenue under perfect competition
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Let's look at a specific example. Let's assume that one of the agricultural producers is engaged in the sale of milk and decides to expand production. Currently, the company russian business email list receives a net profit of 100 rubles from each liter of production. Having decided to invest in the expansion of feed bases and the construction of complexes, the company increases production by 15%. But its competitors are also taking such actions. As a result, one and a half times more milk enters the market, which leads to a drop in the price of the product by 40%.
This situation puts production at risk, as losses mount. The more animals a producer keeps, the greater the costs he will incur. The perfectly competitive industry is on the path to economic decline. This example illustrates the concept of marginal revenue, where further price increases become impossible, and an increase in supply on the market only leads to losses.
The opposite of perfect competition
Unfair competition occurs when there is a limited number of sellers in the market and the demand for their goods is constant. Businesses can negotiate and set prices for goods, interfering with natural market mechanisms. However, this is not always due to collusion or fraud. Often, entrepreneurs join forces to establish clear rules and production quotas to ensure planned and efficient growth. Such companies plan their profits in advance and avoid marginal revenue, since they act in a coordinated manner and do not supply excess goods.
The highest level of unfair competition is monopoly. In this case, several large players merge, which leads to the disappearance of competition. Due to the lack of other companies with similar goods, monopolists can set inflated prices, receiving excess profits. Many modern states oppose such mergers by creating special anti-monopoly bodies. However, in reality, these measures are not as effective as governments would like.
The opposite of perfect competition
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When unfair competition occurs
New, unexplored areas of production where constant scientific and technical progress occurs. Not all companies have sufficient financial resources to develop such technologies. Often, several leading companies create more advanced products and remain monopolists, increasing the price of these goods.
Industries that depend on powerful associations in a single large network . Examples of these industries are the energy sector and the railway network.
Benefits of Unfair Competition
Large incomes make it possible to invest in modernization, development and scientific and technological progress.
Companies often expand their production of goods, creating competition between their products.
The need to protect one's position leads to the creation of an army, police, and also the expansion of the budgetary sphere of employment, as more employment opportunities appear. This contributes to the development of culture, sports, architecture and other spheres.