It can be argued that perfect competition will yield the following benefits:
1. No information failure and knowledge is shared
evenly between all participants.
2. There are no barriers to entry
, so existing firms cannot derive any monopoly power.
3. Only normal profits made
, so producers just cover their opportunity cost.
4. There is no need to spend money on advertising, because there is perfect knowledge and firms can sell all they can produce.
5. In addition, selling unbranded goods makes it hard to construct an effective advertising campaign.
- 6. There is maximum possible:
- >> Consumer surplus
- >> Economic welfare
- 7. There is maximum allocative and productive efficiency:
- >>Equilibrium will occur where P = MC, hence allocative efficiency.
>> In the long run equilibrium will occur at output where MC = ATC
, which is productive efficiency
7. There is also maximum choice for consumers.