Question

Given that perfect competition cannot be realized in the real world, what is your view of the use of perfectly competitive long run equilibrium as a normative device ?

Answer 1

it can be mentioned that the given statement is true that a perfectly competitive market does not exist but the long run equilibrium of a perfectly competitive market is the optimal level so that the Welfare ismaximized and if it is used as a normative device and in the real world scenario where perfectly competitive market doesn't exist you can actually calculate the equilibrium level of output and understand how close it is getting to that of perfectly competitive output so that you can understand the efficiency of the effectiveness of the industry on the whole and that is the reason why it is important to use perfectly competitive long run equilibrium as a normative device all in all