The advantages of a perfectly competitive market are as follows.
- A perfectly competitive market can promote the microeconomic operation to maintain high efficiency. A perfectly competitive market excludes any monopolistic nature and any restrictions, and operates entirely according to the regulation of the market, thus promoting the microeconomic operation to maintain high efficiency. Under the conditions of perfectly competitive market, inefficient and ineffective producers are forced to leave the market in the competition among many producers, while efficient producers continue to exist, and at the same time, more efficient producers enter the market at any time to participate in the market competition, and more efficient producers win in a new round of market competition, thus, perfectly competitive market can make producers Therefore, a perfectly competitive market can encourage producers to give full play to their own enthusiasm and initiative, and carry out high-efficiency production.
- A perfectly competitive market can promote the improvement of production efficiency. A perfectly competitive market can promote producers to produce at the lowest cost and thus improve production efficiency. Because in the perfectly competitive market type conditions, each producer can only be the recipient of the market price, so they want to maximize their profits, they must be the lowest cost of production. That is, they must produce at the output that would have been produced if the average cost of their product was at its lowest point. Producers to the lowest cost of production to produce the highest output of products, which is an optimal scale of production, such production is not a waste of any resources and production capacity, so that the production process is a way to promote the process of increasing production efficiency and effectiveness.
- A perfectly competitive market can promote the interests of society. Competition in a perfectly competitive market, in the process of guiding producers to pursue their own interests, but also effectively promote the interests of society. This is the major discovery and famous assertion of Adam Smith. He argued that market competition leads each producer to constantly strive to pursue his own interests, not in the interests of society, but, guided by an “invisible hand,” to try to achieve a purpose that they do not intend to achieve. Their pursuit of their own interests often makes them more effective in promoting the interests of society than they would be if they were truly motivated by their own intentions. For example, if each producer strives to maximize the value of the product he or she produces, the result will be a large increase in the annual revenue of society, which in turn will contribute to the increase in the public good.
- Perfectly competitive markets can improve the efficiency of resource allocation. Under the condition of perfectly competitive market, the resources can flow freely to the commodity production sector that can best meet the needs of consumers. In the process of continuous flow of resources, the effective choice of resources between different uses, different benefits and different combinations in the production process is realized, so that the resources can play a greater utility, which will greatly improve the efficiency and effectiveness of resource allocation.
- Perfectly competitive market is conducive to the maximization of consumer and consumer demand satisfaction. Under perfectly competitive market conditions, prices tend to be equal to the cost of production. Thus, in many cases, it can form the lowest price for consumers. Moreover, profits in perfectly competitive market conditions are smaller than in other non-perfectly competitive market conditions, so that in the case of pure competition, it is the consumers who profit the most. Also, a perfectly competitive market tends to maximize the satisfaction of consumer demand.
Despite the fact that perfectly competitive markets are almost non-existent in real economic life, the study of perfectly competitive market types still has its positive significance. When people are familiar with the theory of perfectly competitive market types and their characteristics, they can use it to guide their market decisions. For example, producers will be able to make correct output and price decisions when similar situations arise (e.g., when they are price takers, etc.). More importantly, the analysis of the theory of perfectly competitive market types can provide a reference for the analysis of other market types. For example, in a comparative study of competition and efficiency in monopolistic, monopolistically competitive, and oligopolistic markets, the theory of perfectly competitive market types can serve as a measure of reference.