Disadvantages of perfect competition, Managerial Economics

Disadvantages of Perfect Competition

  1. There is a great deal of duplication of production and distribution facilities amongst firms and consequent waste.
  2. Economies of scale cannot be taken advantage of because firms are operating on such a small scale. Therefore although the firms may be highly competitive and their prices may be as low as is possible, given their scale of production, nevertheless it is a higher price that could take advantage of economies of scale.
  3. There may be lack of innovation in a situation of perfect competition. Two reasons account for this:

i. The small size and low profits of the firm limit the availability of funds for research and development

ii  The assumption of free flow of information, and no barriers to entry, implies that innovations,  will immediately be copied by all competitors, so that ultimately individual firms will not find it  worthwhile to innovate.

Posted Date: 11/28/2012 5:11:12 AM | Location : United States







Related Discussions:- Disadvantages of perfect competition, Assignment Help, Ask Question on Disadvantages of perfect competition, Get Answer, Expert's Help, Disadvantages of perfect competition Discussions

Write discussion on Disadvantages of perfect competition
Your posts are moderated
Related Questions
PUBLIC SECTOR BORROWING REQUIREMENT (PSBR) Public Sector Borrowing Requirement (PSBR) is the amount which the government needs to borrow in any one year to finance an excess e

Objectives of IMF To achieve these objectives, the following conditions would have to be fulfilled: - i.            Countries should not impose restrictions in their trade

Income elasticity of demand The income elasticity of demand measures the degree of responsiveness of the quantity demanded of a product to changes in income.  Its co-efficient

Why do the managers in marris model maximise their satisfaction by choosing a higher growth rate and a lower valuation ratio when compared to the profit maximisation

gap between economic theory and business practice

Calculate point elasticity of demand for demand function Q=10-2p for decrease in price from Rs. 3 to 2

Transitional unemployment Transitional unemployment is that situation which prevails due to some temporary reasons.  The main reason for this type of unemployment are:

explain critically growth maximisation model of morris ?

You have been provided with daily data starting in January 2009 on the main New Zealand stock market index, the NSX-50. Choose a suitable model for measuring volatility on the New

Q. What is Monopoly? The term 'Monopoly' has been derivative of Greek term 'Monopolies' that means a single seller. So, monopoly is a market condition in that there is a single