In economic theory, perfect/pure competition describes markets such that no participants are large enough to have the market power to set the quantity of a homogeneous product. Because the conditions for perfect competition are strict, there are few if any perfectly competitive markets. Still, buyers and sellers in some auction-type markets, say for commodities or some financial assets, may
. approximate the concept. Perfect competition serves as a benchmark against which to measure real-life and imperfectly competitive markets. Generally, a perfectly competitive market exists when every participant is a "price taker", and no participant influences the price of the product it buys or sells. Specific characteristics may include: Infinite buyers and sellers Infinite consumers with the willingness and ability to buy the product at a certain quantity, and infinite producers with the willingness and ability to supply the product at a certain quantity. Under perfect competition, any profit-maximizing producer faces a market price equal to its marginal cost. This implies that a factor's price equals the factor's marginal revenue product. The abandonment of price taking creates considerable difficulties to the demonstration of existence of a general equilibrium except under other, very specific conditions such as that of monopolistic competition. Certain industries may exhibit perfect competition, such as dry cleaners or any other form of simple services (barber shops, courier services, etc.). This is because these industries have limited barriers to entry and are very easy to replicate and difficult to differentiate your services. As such, prices are set by the market. Unlike monopolies or oligopolies, all participants in a perfectly competitive market cannot set their price without going out of business. This is due to the nature of the product offered, which is assumed to be a commodity product. Because the product is easily produced and distributed, it is impossible to charge higher than the market price and still stay in business. http://tutor2u.net/economics/content/topics/competition/competition.htm or http://www.amosweb.com/cgi-bin/awb_nav.pl?s=wpd&c=dsp&k=perfect+competition
