Final answer:
An administrative decision is a key part of a firm's strategy, affecting its structure and operational choices. It balances internal production and cost conditions with the competitive nature of the market structure. Perfect competition simplifies administrative decisions to focus mainly on quantity produced.
Step-by-step explanation:
An administrative decision is one of the two major decision categories addressed by a strategy. It includes the policies, people, decision rules, and organizational structure choices made by a firm. Administrative decisions encompass how a company is organized, how it defines roles and responsibilities, and how it goes about making strategic and operational decisions.
These decisions are informed by both internal factors, such as production and cost conditions, and external factors like the market structure for a firm's products. Market structure can be defined by the level of competition within the industry, the market power held by each firm, and other dynamics that shape how a firm can behave and succeed.
In a perfectly competitive market, a firm's main strategic choice is centered around output - specifically, what quantity to produce. This single decision is driven largely by the basic definition of profit, which equates to total revenue minus total costs. In this scenario, administrative decisions are streamlined, as market forces largely dictate the actions a firm can take.