Why is an imperfectly competitive firm considered less attractive to consumers than a perfectly competitive firm?

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Expert Solution

Imperfectly competitive market consist of many firms which offers varied goods to the consumers. The firm usually charges high price for their goods compared to the firm in perfect competition. Imperfectly competitive firm does not meet the basic requirements of a perfectly competitive firm.

Perfectly competitive firm is generally considered as a price taker. The firm cannot make profits by charging high price on goods. In such a market the close of substitute of product will be available.

It is said that an imperfectly competitive firm is less attractive while compared with that of a perfectly competitive firm. It happens because the price charged by the imperfectly competitive firm will be higher than the other. The product offered by different firms in the market will be different. So that the customers cannot purchase from any other firm if a particular firm charges high price fir a good. Due to lack of competition the products offered by the firm will be poor in quality. The firms usually offer out dated goods to customers in imperfectly competitive market. The government intervention will be comparatively high in imperfectly competitive firm due to irregularity in the pricing. Such firms will not consider the needs and wants of the customers. Where as the customers get low priced and high quality goods in perfect comparative firm. The reputed and highly competitive firms exist in the perfectly competitive market. Government intervention will be very low here.

Rahul Sunny answered 1 year ago

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