Types of competition

Four basic degrees of competition exist in a private enterprise system: pure competition, monopolistic competition, oligopoly, and monopoly.

Pure Competition

Pure competition involves similar products that cannot be differentiated from those of competitors. In a purely competitive market, it is relatively easy for a firm to enter or leave that market. Agriculture is probably the closest example of pure competition and wheat is an example of a product that is similar from farm to farm.

Monopolistic competition is a market situation where firms are able to differentiate their product from those of competitors. You can see monopolistic competition operating when you watch commercials that try to persuade you to choose one brand over another. Monopolistic competition gives a firm some power over the price it charges. Think about retail stores, where prices can vary among different brands of aspirin, toothpaste, or gasoline.

Oligopoly is a market in which there are few sellers. In some oligopolies such as steel, the products are similar; in others, such as automobiles, they are different.

The primary difference between oligopoly and the previously mentioned types of competition is that the limited number of sellers gives the oligopolist more control over price. In an oligopoly, the prices of competitive products are usually quite similar because substantial price competition would lessen every firm's profits.

Monopoly is a market situation in which there are no competitors.

Система приватного підприємства

Most U.S. business, large and small, belong to what is called the private enterprise system, in which success is determined by how well they match and counter the offerings of competitors. Competition is the battle among businesses for consumer acceptance. Sales and profits arc the yardsticks by which such acceptance is measured.

In the private enterprise system, firms must continually adjust their strategies, product offerings, service standards, and operating procedures; otherwise competitors may gain larger shares of the industry's sales and profits.

Competition is the mechanism that guarantees the private enterprise system will continue to offer the goods and services that provide high living standards and sophisticated life-styles. Few business organizations escape the influence of competition.

The private enterprise system, or capitalism, is founded on the principle that competition among firms best serves the needs of society.

The private enterprise system guarantees people the right to own, use, buy, sell, and bequeath most forms of property, including land, buildings, machinery, equipment, inventions, and various intangible properties. The right to private property is the most basic freedom under the private enterprise system. People living under private enterprise system believe they should have the right to any property they buy and to all benefits resulting from such ownership.

Profits. The private enterprise system also guarantees business owners the right to all profits (after taxes) earned by the business. There is no guarantee the business will earn a profit, but if it does, the owner is entitled to it legally and ethically.

Under a private enterprise system, citizens are free to choose their employment, purchases, and investments.

They can change jobs, negotiate wages, join labor unions, and quit work if they so desire.

The private enterprise system also allows the public to set rules for competitive activity. This is why the U.S. government has passed laws to prohibit «cutthroat» competition — excessively competitive practices designed to eliminate competitors. It has also established ground rules that outlaw price discrimination, fraud in financial markets, and deceptive practices in advertising and packaging.