8.4 Competition Maximizes Economic Well-Being
We have two main reasons to study competition in a managerial economics course. First, many sectors of the economy are highly competitive, including agriculture, parts of the construction industry, many labor markets, and much retail and wholesale trade. Second, and perhaps more important, perfect competition serves as an ideal or benchmark for other industries. This benchmark is widely used by economists and widely misused by politicians.
Most U.S. politicians have at one point or another in their careers stated (with a hand over their heart), “I believe in the free market.” While we’re not about to bash free markets, we find this statement to be, at best, mysterious. What do the politicians mean ...
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