Question

Given that in the perfect competition all products are identical and consumer have the same information, Will any kind of interventions by them firm are useful? Why or why not ?

Answer 1

The perfect competition is characterised by the presence of huge number of sellers, each selling identical product, and buyers with each having the perfect information about the prevailing price level in the industry. Also price is set by the industry and no firm has control over the prices, if any firm tries to charge more than the equilibrium price which is P equals to MC then nobody will buy from that firm because consumers have perfect information about the prevailing price level. Therefore, any kind of interventions by firm are not useful because if they try to intervene which will help them to raise their profits then they will lose the consumers as consumers have perfect information about the prices.