Production and Perfect Competition pt 1

Sir Shannon Scott Williams

January 17^th, 2010

ECON220

Unit 3: Discussion Board

Production And Perfect Competition

When I think of perfect competition, I think of something similar to a monopoly, however the difference is that a perfect competition is a market in which all other participating markets are price-takers, (Krugan, Wells, 2009, p. 330). In USA, the government tends to put limits on monopolies, but most obstacles for perfect competitions are left out, (Krugan, Wells, 2009, p. 331). Choosing a perfect competition should be the matter of what is the first line of a production (eg. steel used to make automobiles).

To my knowledge for the local area, there is a chicken farm named Kagel’s Chicken Farm. Factors that help support Kagel’s are that there are several different types of buyers and sellers for whole chickens, eggs, and fertilizer. Buyers would be slaughterhouses for live chickens, food stores for eggs, and those in need of fertilizer. Sellers, like Kagel’s, would be those limited to chicken farming.

Being that Kagel’s is a base supplier, this makes it a price-taker giving it the advantage to alter production without heavily affecting the market price for its products, also known as a standardized product. Kagel’s and other chicken farmers sell their products at market price, a base price that is offered in the marketplace. Perfect competitions, like Kagel’s, cannot change prices based on their production due to the ease of entry and exit for farming. Due to this, governments do place regulations for safety. The regulations include: all poultry establishments develop and implement a written sanitation standard operating procedures (SSOPs), requires all meat and poultry establishments to develop and implement a HACCP program, (Economic Research Service, 2009). Other regulations are more specific to slaughterhouse industries.

In conclusion, the perfect competitive market is narrowed down to the beginning of what a product could be. The competitors for perfect competition are limited to those willing to participate. In the case for Kagel’s, and others alike, their supply must weigh a certain amount before being sold. Kagel’s products are sold at market price. Consumers who wish to purchase products from Kagel’s are those of the slaughterhouse industry which supply uncooked or pre-cooked chickens to their consumers. Other consumers are food stores interested in the eggs which the chickens produce. Also, there are consumers for fertilizer which is produced from chicken manure. In order for Kagel’s to enter and remain in business, they must meet government safety standards. In the real world, Kagel’s has the advantages of their consumers due to the great demand from each industry. If one industry decrease demand for a product, Kagel’s still has the opportunity to deliver to another industry.

References:

Armstrong, Kotler. (2009). Introduction to Marketing (9^th Ed.).

Pearson Education, Inc, Upper Saddle River, New Jersey.

Economic Research Services. (2009). “All poultry establishments develop and implement a written sanitation standard operating procedures (SSOPs), requires all meat and poultry establishments to develop and implement a HACCP program”. Ers.Usda.Gov

Retrieved 1.18.2011, from, http://www.ers.usda.gov/briefing/foodsafety/private.htm

Monday, February 7, 2011 // Labels: economics, part 1, perfect competition, production // 17 comments //

17 comments to "Production and Perfect Competition pt 1"

February 7, 2011 at 4:54 PM
CreamSodaAndWhiskey says:

Interesting stuff. I feel like this is one of the more educational blogs I follow.
February 7, 2011 at 6:06 PM
Jordan says:

good info thanks for posting this
February 7, 2011 at 6:24 PM
Sam says:

Wow, very interesting, thanks for sharing this man :)
February 7, 2011 at 7:21 PM
CRS says:

I wonder how many base suppliers require raw materials from the earth (minerals, land) and as these materials start disappearing what effects we're going to see on market prices.

Also, would the feed-supplier for Kagel's also be considered a base supplier?
February 7, 2011 at 8:01 PM
Unknown says:

So in order for you to be a successful entrepreneur, you need to find a business idea that is essentially the perfect gear in the economic machine that you're targeting.
February 7, 2011 at 8:34 PM
lovebloggin says:

awesome thank you!
February 7, 2011 at 10:52 PM
Zach says:

Great info.

-Zach
http://evanztories.blogspot.com
http://ducks2nucks.blogspot.com
February 8, 2011 at 12:29 AM
cooperlife says:

is Wal-Mart too big to fail?
February 8, 2011 at 4:35 PM
G says:

you just need to find that niche in the production chain...cool post
February 9, 2011 at 12:33 PM
Wolfe says:

Interesting. Overall though, chicken farmers have horrible profit margins. This works well if you are selling to a local market or a cooperative. However larger buyers tend to in essence divide and conquer by making you dependent on you and driving down prices.
February 11, 2011 at 1:50 AM
!sense! says:

i love monopoly
February 11, 2011 at 4:40 PM
Stuff that matters, stuff that don't says:

Don't know about there, but here in the UK there are just a few big supermarket chains that buy the majority of all products of farming and they effectively set the price. This has driven a lot of small farms out of business over the last few years, and farming is trending towards larger more intensive units with lower standards of welfare. Overall not a good thing for the farmers.
February 12, 2011 at 10:10 PM
Keaton Collins says:

I love monopoly!!
February 13, 2011 at 4:30 PM
S.S. says:

Great article. Very interesting.
February 14, 2011 at 3:22 PM
Mouse Roberts says:

Really useful and informative, any chance you could explain an oligopoly with some cited sources.
Keep up the good work.
February 19, 2011 at 1:44 AM
Anonymous says:

I love playing monopoly!
March 19, 2011 at 7:35 PM
DanielM says:

Very interesting stuff.