Question

Argue against or for Perfectly Competitive markets-provide a rationale

Answer 1

A perfectly competitive market is a hypothetical market where competition is at its greatest possible level. perfect competition would produce the best possible outcomes for consumers, and society.

Arguments in Favor of Perfect Competition ::

Perfect competition models are used in microeconomics to explain and predict the actions of individual actors. To isolate specific variables and quantify their impacts, certain other problematic realities must be assumed away. These include barriers to entry and sticky prices; the role of entrepreneurs; heterogeneous and substitute goods; and imperfect information.

Complete realism is clearly unattainable and models must yield predictions that are good enough for the purpose in hand or that are better than predictions from alternative theories.In other words, economics never has perfect testability and economists should look for the most accurate theories.

perfect competition described a desirable end, one that public policymakers and business managers could use to make economic decisions.Perfect competition models implies surpluses and deadweight losses to improve efficiency.

Arguments Against Perfect Competition Models::

Despite its current orthodox status, many economists have criticized the use of perfect competition models. Critics claim the assumptions remove crucial characteristics of real markets and when those assumptions are dropped, the models no longer yield meaningful results.

theory of pure, or perfect, competition had no claim to be called competition because the normal devices of competition are incompatible with the model. These include advertising, undercutting, or offering different products and services.

It produces unrealistic and otherwise impossible results that are nevertheless used to justify irresponsible government policy. He points to antitrust legislation, which uses perfect competition as the benchmark for identifying so-called market failures.

Perfect competition confines itself to defining conditions in which its conclusions are already implicitly contained and which may conceivably exist but of which it does not tell us how they can ever be brought back.