The late economic historian Peter Schumpeter considered perfect competition to be "inferior" to monopoly. Why was...

The late economic historian Peter Schumpeter considered perfect competition to be "inferior" to monopoly. Why was this? Why might monopolies spend more on research and development.

Expert Solution

in perfect competition the product are similar in nature,size and price . product are homogeneous in this type of competition sellers and buyers have perfect knowledge about price. easy to enter and exit. here firm is a price taker. as buyers have perfect knowledge about rice and firm is price taker producer does not able to make extra profit.

monmopoly: in this type of competition only a single seller exist. there are some restriction to enter in this type of competition here the firm is price maker. so the producer can make extra profits in this type of market . monopoly starts from innovation and that is the reason a firm can make prce of its innovation and creativity

that is why peter schumpter considered perfect competition to be inferior to monopoly as monopoly borns with innovations and creativity it requires more money on research and development. monopoly is all about innovations

Rahul Sunny answered 5 months ago

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