Perfect competition Vs the real world

Perfect competition is an economic theory of firms. Firms that meet in different levels of competition, respond in different ways, this is depending on the type of rivalry they will encounter. Whether it is price or cost of production through economies of scale (not as likely to exist in perfect competition), the product through technological advances or any other form of competing. Perfect competition does not actually exist as in the real world only monopolistic …

…to account other factors that are forgotten in perfect competition. We can therefore conclude that perfect competition is a concept that exists only to be used as a tool of analysis. This is due to external factors outside a firms control and the need for equity and fairness in the real world. We can use perfect competition as a simplified model that firms may aim to achieve but we cannot achieve it due to externalities.