Question

What are the benefits of the perfect competition model?

75 word response

Answer 1

The benefits of perfect competition are that it does not result in consumer exploitation as the firm produces where the Price is equal to marginal cost so this would result in an efficient outcome which minimizes wastage of resources and does not lead to market failure.

The consumer will get standardized product irrespective of where he lives and so he does not have to worry about the quality of the good. It also minimizes the firms cost as the firm does not have to spend much on advertisements because sales would happen according to the market price so there is no pressure on the firms to engage in price competition which also benefits the consumers and helps the market to remain at the equilibrium position.