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Perfect Competition

Pure Competition

Perfect competition, also known as pure competition has four basic characteristics:

  1. Large number of participants
  2. Standardized products
  3. Price takers not price makers
  4. Easy to enter or exit the market

Farming in the United States has the characteristics of perfect competition because there are many farms in the US, and they produce standardized products such as wheat and corn. These farms must accept the market price for their goods, and anybody can buy some land and become a farmer so the market is easy to enter.

According to the ERS/USDA (2010) website, “A farm is defined as any place from which $1,000 or more of agricultural products were produced and sold, or normally would have been sold, during the year” (p. 1). Perfect competition in the farming industry helps farmers because “the demand schedule faced by the individual firm in a purely competitive industry is perfectly elastic in the marketplace” (McConnell, Brue, & Flynn, 2012, p. 165). This means that no one farmer selling corn is making anymore than any other farmer growing corn. Of course, this perfectly elastic demand curve can hurt a farm because production may change from year to year due to condition beyond anyone’s control, but whatever the price, the farm will have to take it.


ERS/USDA. (2010, Nov). Farm Household Economics and Well-Being: Glossary. Retrieved Sept 3, 2012, from ERS/USDA

McConnell, C., Brue, S., & Flynn, S. (2012). Economics principles, problems, and policies. New York, NY: McGraw-Hill Irwin.