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Advantages of perfect market, Managerial Economics
Advantages of Perfect Market
It achieves, subject to certain conditions, an allocation of resources which is: socially optimal" or "economically efficient" or "pareto efficient".
Perfectly competitive firms are technically efficient in the long run, in that they produce that level of output, which minimizes their average costs, given their small capacity.
Perfect competition achieves an automatic allocation of resources in response to changes in demand.
The consumer is not exploited. The price of goods, in the long run will be as low as possible. Producers can only earn a normal profit, which are the minimum levels of profits necessary to retain firms in the industry, due to the existence of free entry into the markets.
Posted Date: 11/28/2012 5:09:56 AM | Location : United States
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