THE ADVANTAGES OF COMPETITION DO NOT DEPEND ON IT BEING ‘PERFECT’1
Competition in the market has benefits that do not depend on it being "perfect." Sometimes, competition helps allocate resources in a way that maximizes production, similar to what a single smart decision-maker could do. However, the idea of "perfect competition" is rare and unrealistic since it is based on conditions that do not exist in many markets. In many cases, only a few companies can produce a product efficiently, which allows them to set prices without having to lower them to the point of marginal costs.
In the real world, some firms can act like monopolies by controlling prices and making more profit, instead of producing at the level where prices equal marginal costs. While a perfect ruler could improve how resources are used by enforcing certain production levels, this idea is impractical because it compares actual market situations with an ideal that we cannot achieve.
To fairly evaluate competition, we should look at whether current market results are better or worse than other available options, rather than how close they are to an unachievable ideal. The main goal is to find ways to improve efficiency beyond what we have now. Competition allows producers to better meet people's needs, even if it does not reach a perfect state.
Competition in the market has benefits that do not depend on it being "perfect." Sometimes, competition helps allocate resources in a way that maximizes production, similar to what a single smart decision-maker could do. However, the idea of "perfect competition" is rare and unrealistic since it is based on conditions that do not exist in many markets. In many cases, only a few companies can produce a product efficiently, which allows them to set prices without having to lower them to the point of marginal costs.
In the real world, some firms can act like monopolies by controlling prices and making more profit, instead of producing at the level where prices equal marginal costs. While a perfect ruler could improve how resources are used by enforcing certain production levels, this idea is impractical because it compares actual market situations with an ideal that we cannot achieve.
To fairly evaluate competition, we should look at whether current market results are better or worse than other available options, rather than how close they are to an unachievable ideal. The main goal is to find ways to improve efficiency beyond what we have now. Competition allows producers to better meet people's needs, even if it does not reach a perfect state.