Bee =3 Posted September 18, 2008 Report Share Posted September 18, 2008 “Perfect Competition is a more desirable market form than monopolistic competition”. Discuss. i've written something .. but i seem to be stuck.. *sigh*help, anybody?ta, B Reply Link to post Share on other sites More sharing options...
Abu Posted September 18, 2008 Report Share Posted September 18, 2008 Perfect competition is not desirable because consumers have to adhere to fixed pricing, unlike monopolistic where firms can compete with each other thereby gaining sufficient savings while purchasing from firms. A perfect competition market is hardly ideal, since market rules and pricing is fixed. Although, a perfect competition is safer because it stops a lot of companies from burning out. Reply Link to post Share on other sites More sharing options...
Vvi Posted September 18, 2008 Report Share Posted September 18, 2008 The other side of the spectrum: Perfect competition doesn't allow for fixed prices because they shift according to demand/supply. In monopolies, they can charge whatever price they want (like Microsoft) because they have complete control of the market. Another example is the diamond industry. Diamonds would be really cheap if the few companies like De Beers weren't withholding supplies to drive up prices.Monopolies also result in lower output and lower quality goods because there is no competition to force them to supply quality goods. Thus, they are not economically efficient. Monopolies also produce at allocatively and productively inefficient levels in the long run.This is all from the IB Economics revision guide. Reply Link to post Share on other sites More sharing options...
Bee =3 Posted September 18, 2008 Author Report Share Posted September 18, 2008 1st pointer. it's perfect competition vs monopolistic (or imperfect) competition.. i.e. NOT monopolies.. 2nd.. i do know it's mainly what we have in our notes.. BUT i was wondering whether there is no extraordinary, genius-like twist to it ^^ .what i have so far:perfect competition: all producers will have the same price consumers don't have to worry about prices rising soon cos producers will not want to have 0 revenue.. there is economic and productive efficiencyon the other hand, monopolistic competition: there is product differentiation, i.e. a greater variety of products to choose from non-price competition, i.e. producers will endeavour to have the upper hand regarding service, quality, etcwhat else?? Reply Link to post Share on other sites More sharing options...
blindpet Posted September 22, 2008 Report Share Posted September 22, 2008 Lack of abnormal (supernormal) profits in PC means there is little capital to research and innovate so they may not provide the most technologically advanced products.PC does not take externalities into account. This means there could easily be overconsumption of demerit goods and/or underconsumption of merit goods. Take gambling, it can be considered perfectly competitive, yet if there was little or no gov regulation you'd have many more gambling addicts, perhaps more theft to pay off gambling debts, etc.There's your 'genius twist' ^ (I think ). Reply Link to post Share on other sites More sharing options...
deissi Posted September 22, 2008 Report Share Posted September 22, 2008 Lack of abnormal (supernormal) profits in PC means there is little capital to research and innovate so they may not provide the most technologically advanced products.However, abnormal profits in MC is impossible in the long run because new competitors entering the market will eat out the abnormal profit. It's very possible in the short run though, but be careful with the time period concerned. Reply Link to post Share on other sites More sharing options...
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