- why PC is beneficial
- consumer sovereignty
- low prices – consumers
- meets productive efficiency because they waste very little resources
- meets allocative efficiency because price always at where supply and demand intersect
- why PC is bad
- products are not varied because of perfect information, other firms will know if one firm differentiates, and therefore firms have no incentive to sell varied products because new firms are likely to erode their abnormal profits
- producer only makes normal profit in long run
- in some industries, PC is not desirable at all.
- in natural monopoly (industries with significant amount of eos), it is beneficial to society to have large firms reaping economies of scale and producing at a low average costs. the PC is unable to do that because firms are small and produce the same items. supermarket-purchasing, managerial eosjoin our economics resources and tuition!
