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The United States has not experienced a major depression since the
                  1930s,  in  part  because  of  the  federal  government's  use  of  anticyclical
                  measures, including wage and price controls, and deficit spending. After
                  a period of economic stagflation in the United States during the 1970s,

                  inflation and  unemployment  were  brought under  control  in the 1980s.
                  The national debt, however, almost quadrupled in that decade. Thus, the
                  federal  government's response to the recession that began in 1990 did

                  not  include  major  new  spending  programs  because  of  a  reluctance  to
                  increase  the  deficit.  In  fact,  an  important  concern  in  dealing  with  the
                  problems of the business cycle is the fear that inappropriate measures
                  might precipitate a severe recession or even a depression.

                           Perfect Competition

                         Competition, in economics, implies conditions that are present in
                  markets  where  buyers  and  sellers  interact  to  establish  prices  and
                  exchange  goods  and  services.  Economic  competition  is  the  means
                  whereby the self-interest of buyers and sellers acts to serve the needs of

                  society  as  well  as  those  of  individual  market  participants.  Society  is
                  served when the maximum number of goods is produced at the lowest
                  possible prices.

                         The  theoretical  ideal  developed  by  economists  to  establish  the
                  conditions  under  which  competition  would  achieve  maximum
                  effectiveness  is  known  as  "perfect"  competition.  Although  rarely

                  possible, perfect competition, as a concept, provides a useful benchmark
                  for evaluating performance in actual markets. Perfect competition exists
                  when (1) an industry has a large number of business firms as well as
                  buyers; (2) the firms on the average are small; and (3) buyers and sellers

                  have complete knowledge of all transactions within the market.
                         The  practical  significance  of  a  large  number  of  small  firms  and
                  many  buyers  is  that  the  power  to  influence  the  behavior  of  the

                  participants  in  the  market  is  thoroughly  dispersed.  In  other  words,  no
                  single person or business has the power to dictate the terms on which the
                  exchange of goods and services takes place. Market results then are truly
                  impersonal.  Under  conditions  of  perfect  competition,  economists

                  contend,  goods  and  services  would  be  produced  as  efficiently  as
                  possible-that  is,  at  the  lowest  possible  price  and  cost-and  consumers

                  would get the maximum amount of the goods and services they desire.


                         Workable Competition





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