Advantages of perfect competition.
- Output is produced at the minimum possible cost. Plants are therefore used at maximum capacity hence no resource wastage.
- Because of the above, consumers pay the minimum price possible.
- No costs of advertising involved since all firms produce and sell the same products at the same price.
- High output results because of free entry of firms in the market/ industry.
- Competition leads to quantity improvement in all firms hence better standards of living enjoyed by consumers ie by consuming high quality products and more commodities.
- High technology may be employed to enable firms produce high quantity. The guest for efficiency and quantity creates innovativeness and inventions.
- Price discrimination does not exist because of perfect competition ie goods and services sold at one ruling price.
- There is no consumer exploitation since consumers are aware of prevailing market conditions such as the price and also since firms aim at normal profits in the long run.
- Perfect competition encourages and promotes efficiency in the production of goods and services in the long run.
Figure 2.30 Efficiency