Discuss the view that a PC firm is always desirable
why PC is beneficial
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!