Example Of Characteristics Of Perfect Competition Course Work

Published: 2021-06-22 00:47:06
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The government has the responsibility of ensuring that there is a competitive and conducive environment for all business. This will not only promote equality and optimal productivity among firms but also protect the welfare of consumers. The government should ensure that the pricing of products is checked, the product quality raised and competition among firms improved.

Industrial regulation is the government’s effort to control prices of industrial products either indirectly or directly. This is done mainly on industries producing utilities such as electricity. Industrial regulation exists to prevent price fluctuations in the industry, stabilize the prices. The government can enforce industrial regulation through the Antitrust Laws. Economic or industrial regulation helps avoid price fluctuation of important commodities for the citizens. It also helps prevent monopolies from exploiting the consumers by setting abnormally high prices. Industrial regulation affects the industries way of setting prices, their production and competition among themselves. Regulation prevents monopolies from coming into existence or controlling how they set their prices so as not to exploit consumers. The government’s aim is to regulate how the firms set their prices to make consumers comfortable .

Social regulation is the government’s effort to impose restrictions aimed at prohibiting or discouraging harmful behaviors in the corporate sector like environmental pollution or to encourage socially desirable behavior. Social regulation helps address social problems affecting workers like product safety, Pollution, discrimination and worker safety. Social regulation helps improve the working conditions of workers, promote unity and proper administration at work places to ensure the workers are productive, safe and healthy. Social regulation brings about equality in employment opportunities, safety of workers at work and on roads, environmental safety and protection, consumer product safety and occupational safety as well as health .

Natural monopoly is a kind of monopoly existing because of high start-up or fixed costs of business operation in a given industry. Since it is economically realistic to have natural monopolies, the government frequently regulates the existing natural monopolies to protect consumers from exploitation. Natural monopolies are formed when a company fixes its prices at a high price because its costs of production are high. Such monopolies come into existence because a company must break even in its operations. When the costs of operation increase, it is realistic that prices will go up as a result. For example a utility industry is a natural monopoly. Establishing costs involve power production and supply into every household. These costs are high hence other companies will not join the industry hence leaving one firm operating as a natural monopoly.

The Antitrust Law is made up of four main components of legislation. Each of these legislations plays a major role in ensuring that the Antitrust Law is respected. The first is the Competitors Agreements. The government regulates contracts between firms selling one product to avoid price fixing. The firms are required to have fair bidding processes and competitors should stick to their market territories to avoid encroachment. The second part of the Antitrust Law is the Contract between Sellers and Buyers. This is aimed at preventing sellers from exploiting buyers. Consumers should know of quality of products and their prices to avoid being misled by sellers. The third part is the Restriction of Mergers. Mergers between firms making one product to form a monopoly are prohibited because this will lead to inefficiency and price hikes. The fort component of the Antitrust is the Prevention of Monopoly Powers. Companies are prevented from forming monopolies which will cause inefficiency in the market and exploit consumers .

There are three main commissions responsible for industrial regulation. The U.S Food & Drug Administration prohibits the sale and use of harmful drugs. The Antitrust laws are used by the government to stop unfair competition and monopolies from exploiting consumers. The Federal trade Commission is responsible for ensuring that industries relate in a good way. These commissions are responsible for efficiency in industrial regulation to ensure that the firms operate fairly and consumers benefit.

The role of social regulation is overseen by five main bodies. The Equal Employment Opportunity Commission is responsible for ensuring that employment opportunities are equally distributed to people of all race and gender . The Environmental Protection Agency is responsible for the protection of the environment . It helps deal with cases of pollution. The National Highway Traffic Safety Administration is responsible for citizens’ welfare on roads . The Consumer Product safety Commission helps in ensuring that consumers get quality and safe products when they buy them.


Boyes, W., & Melvin, M. (2012). Economics (9 ed.). London: Cengage Learning.

McEachern, W. A. (2011). Economics: A Contemporary Introduction (9 ed.). London: Cengage Learning.

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