Final answer:
Market competition refers to the competition among companies in the same industry, with top executives potentially preferring less competition for increased profits. Perfect competition, characterized by numerous buyers and sellers and homogenous products, contrasts starkly with a monopoly. Firms in perfect competition adjust differently in the short run compared to the long run, with the long-term outcome typically being normal profits for all.
Step-by-step explanation:
Market competition is the rivalrous contest between companies seeking to win the choice and preference of consumers. Although some might believe that high-level executives favor competitiveness, they may actually prefer situations with less competition, as this can lead to higher profits.
In economic theory, one model is perfect competition, which is characterized by a large number of buyers and sellers, no barriers to entry, and homogenous products. This ensures that no single entity has control over the price of goods or services. The opposite of this model is monopoly, where only one firm dominates, with no competition.
In a perfectly competitive market, firms respond differently in the short run versus the long run. In the short run, they may not be able to adjust production or the market may not be fully saturated, whereas in the long run, there can be free entry and exit in the market, which leads to all firms earning normal profits.
The characteristics and subsequent responses of firms in these types of market structures are essential understanding for examining market dynamics.