Firms try to avoid competition so that they can set higher profits and earn greater profits.
Collusion describes a group of firms cooperation with each other in order to avoid competition.
why do small firms continue to exist despite competition from large firms
Under pure competition, firms produce a homogeneous product, so there is no reason to advertise. Pure competition is also known as perfect competition.
A cartel or monopoly causes business firms to combine to prevent competition.
Pure competition
Firms might engage in price competition by advertising that they offer the lowest price on selected merchandise. Price competition lowers the selling price of the good, relative to competitors' prices.-From Usatestprep.com
In monopolistic competition, firms capture monopoly profits through specialisation of their product, making it non-substitutable with competing firms' products. In oligopolistic competition, this does not occur. Instead, three are three general outcomes: 1) firms collude to mimic a monopoly and share monopoly profits; 2) a dominant firm leads the market and sets the price; 3) firms compete freely and but take each other's decisions into account.
In the short run, firms in monopolistic competition can make profits or losses due to varying demand and costs. In the long run, firms can only make normal profits as new firms enter the market, increasing competition.
Existence of large firms, no competition and influence over the prices are some of the characteristics of monopolistic competition.
Perfect competion lowers the cost of good and services by increasing the competition among firms.
Perfect competition and monopolistic competition are distinct market structures, but they share some similarities. Perfect competition features many firms selling identical products, leading to no single firm influencing market prices. In contrast, monopolistic competition has many firms as well, but they sell differentiated products, allowing for some degree of market power. The term "monopolistic" in monopolistic competition refers to this ability of firms to set prices above marginal cost due to product differentiation, which is not present in perfect competition.
Perfect Competition