A. Perfect Competition and Short-Run Economic Profit

Perfect competition is the cornerstone of economic theory, characterized by the market structure of large companies, uniform products, and free entry and exit Augier, M., & Teece, D. J. (Eds.). (2018). In this market structure, companies are price takers, i.e. they have no control over market prices. They can sell as much as they want at the current market price. The market is the best choice for customers because they can get products at the fair price offered by the market. If a company seeks to increase its price without adding any additional value, consumers will likely act rationally in their own interests and switch to alternative sellers offering similar products at low prices (Elder-Vass, D. 2019). This consumer behaviour exerts downward pressure on the price of companies and forces them to adjust their price strategy to meet market expectations and maintain competitiveness. This dynamic shows the inherent self-regulation mechanisms of competitive markets (Gerpot and Bendels, 2022). Phoebe is an Australian bread company that operates in such a market. It has no influence on the price of bread and must accept the price determined by supply and demand forces. This is a fundamental characteristic of perfect competition, and the actions of individual companies do not affect market prices. In the short term, companies such as Phoebe can achieve economic gains. This is a scenario where the total revenue of the company exceeds both explicit and implicit costs. The explicit cost is the direct cost of production, such as wages and raw materials, while the implicit cost includes the opportunity cost of materials used in production. This occurs when the price (P) is above the average total cost (ATC) at the production level that maximizes profits. If the marginal cost (MC) is equal to the marginal income (MR), the company will maintain production, provided the P > ATC is achieved. This is because, in the short term, a fully competitive company maximizes profits by producing a production quantity at a price equal to the marginal cost of the last production unit. Thus, as long as the cost of the product is below the price of the product, Phoebe will continue to produce it.

However, in a highly competitive market, it is important to point out that short-term economic benefits cannot be guaranteed. It depends on the relationship between the market price and the average total cost of the company. If market prices are below average total costs, companies will suffer economic losses. Another factor is demand. If the demand for a product is lower at a particular price, supply must be limited to meet demand and affect overall economic benefits.

B. Long-Run Transition and Market Entry

In perfectly competitive markets, long-term shifts are characterized by the influx of new competitors, a phenomenon driven by economic profit. If industrial companies earn economic profits, they attract new companies to join the industry. As these new companies enter the market, the supply curve shifts to the right and prices and profits decrease. This cycle continues until economic profits shrink to zero because in the long run companies have the freedom to change all their inputs into Lambson (1992). Long-term transitions also include changes in production factors' costs. In the long term, production prices will change due to the entire amount of changes in production costs. Changes in fixed costs will also affect long-term prices and output in perfect competition. In the long term, perfect competition leads to maximum efficiency Augier, M., & Teece, D. J. (Eds.). (2018).

D. J. (Eds.). (2018). It is used to measure market performance for other theoretical and real-world market structures and other economic concepts. Finally, long-term transition to a fully competitive market involves the entry of new companies, changes in production costs and changes in prices and production. This transition is based on achieving zero economic benefits and maximum efficiency. C. Cartel Formation and Its Implications

Cartels are a combination of independent companies producing similar goods and services. As a result, they entered into an agreement as a single producer to control supply, fix prices, and manipulate other market conditions, and both Collusion and Monopoly have the same consequences for social welfare. First of all, under the conditions of the cartel, the price of goods and services is usually higher. By fixing prices and supply levels, cartel members create artificial prices. The changes tend to result in a decline in consumer surpluses. Consumer surplus means the amount of money that people pay for goods or services more than they pay in a perfectly competitive market. Second, cartels may lead to inefficient allocation of resources. Lee J.S. and Lee J.S. (2016). In a perfect competitive market, resources are allocated according to supply and demand. However, in cartels, companies can manipulate the supply in order to maintain high prices, which leads to excessive allocation of resources to cartel industries. This may lead to inappropriate allocation of resources at the macroeconomic level and thus to a reduction in overall economic efficiency. Thirdly, the establishment of cartels can inhibit innovation and competition. Cartel itself reduces competition in the market. This lack of competition may hinder innovation, as companies have little incentive to improve their products and services in order to gain a competitive advantage. This could reduce the dynamic efficiency, a key element of social welfare. Finally, the establishment of cartels can have a long-term impact on social welfare. Cartels can bring short-term benefits to companies concerned, but in the long term they can cause market instability. If the cartel collapses, it may result in market disruption, price volatility and potentially harmful economic impacts.