Agent456
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Explain two reasons why perfectly competitive markets may not beneficial for consumers


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jpt4749
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Maybe because in perfect competition the price has to be determined by Market equilibrium so all consumers pay the same regardless of having different willingness to pay.

Another point is maybe that in perfect competition all products are homogeneous so lack of differentiation results in low variety of goods & services available to customers.
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Agent456
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(Original post by Nathan9087)
Maybe because in perfect competition the price has to be determined by Market equilibrium so all consumers pay the same regardless of having different willingness to pay.

Another point is maybe that in perfect competition all products are homogeneous so lack of differentiation results in low variety of goods & services available to customers.
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darth-kronos
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1) lack of product differentiation (an integral part of perfect competition theory is the production of homogenous goods) reduces choice to consumers, meaning they have to settle for the closest substitute (which is unlikely to be what they're looking for). This diminishes marginal utility of consumption, leading to lower overall consumer welfare
2) firms in perfectly competitive markets only make normal profits in the long-run, therefore firms are unlikely to invest in R&D and innovation to deliver higher quality products (assuming they're profit maximisers). This would be particularly damning in technological industries as it could, to some extent, harm technological progress.
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