By Albert Makendenge

There are many types of market structures which are perfect competition, pure monopoly, monopolistic competition and oligopoly. The market structure of the agricultural industry is, however, usually said to be perfect competition which is sometimes referred to as pure competition. This is so because the market structure is characterized by a large number of firms and each of the firms in perfect competition produces an insignificant percentage of the total market output. Therefore no single firm can influence or control the ruling market price.

Apart from the aspect of control, the agriculture product itself is said to be standardized or homogenous and this means that a buyer cannot differentiate in terms of quality, packaging or labelling. Therefore in agriculture, market customers do not really care which specific firm they buy from because the commodities are almost always identical. And in light of that, the firm cannot charge different prices for same product in the market. Perfect competition is also characterized by the freedom of entry and exit. This means that every seller has the choice to enter or exit the industry and there are no barriers to their entry and exit. This characteristic ensures that there are no abnormal profits and losses in the long run.

Although there is fierce and intense competition in this type of a market structure, it is that rivalry amongst different market players that may give birth to improved quality on the market as each one will be fighting to stand out and thrive. 

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