Wastes of MONOPOLY Competition

Another similar waste is “expenditure” on  in north 01 India may he selling . the consumers in the south. At the same rime. the same (or substantially the same) commodity is perhaps being sold by a firm located in the south to consumers living in the north. This state of affairs is also due to the absence of perfect competition, which in its turn is du,. to irrational buyer’s preferences. If competition were perfect. the firms in the north would have attracted all the buyers in the north and the firms in the south all the buyers there. by slightly lowering the price. This would have saved the cost of transport. As it is. the firm deem it worthwhile spending considerable sums 011 advertisement and transport cost. rather than reduce the price sufficiently to attract the neighbouring consumers with irrational preferences. (il’) A third waste of imperfect competition is the failure of each firm in all industry to specialists ill thc production of those Thing for which it is best suited. Under perfect competition, such a specialisation would naturally take place, provided it led to any real economies. Under conditions of imperfect competition, since each firm has lu spend money on advc nisc cntur to sell at considerably lower prices in order to attract customers from its rivals, “each firm may find that It pays it belief to produce varied assortment of types and qualities to sell to its own particular customers, rather than face the cost of attracting a large number of customers for one type of product alone.” (I’) Still another waste of imperfect competition has already been noted. This is that, under such conditions the efficient firm which can produce at lower cost may fail to drive out the inefficient ones as would happen if competition were perfect. If competition is perfect, the efficient linn (or firms) will increase output until the price comes down to the marginal cost of production at which the inefficient firms will not he able to supply. But. if competition is imperfect and the efficient firm has to spend consider able sums to attract consumers from inefficient rivals, or it has to lower its price consider ably to achieve the same end, it might prefer not to drive out the inefficient finns, even though the latter were charging a pI ice higher than the marginal cost of the efficient finn. Thus. valuable resources arc wasted because of CXI,’t’S, capacity  idle plant and  an powcr in each Kirill. Conclusion Thus. under imperfect competition, producers incur losses, valuable resources of the community arc wasted and the consumers suffer from too prices.