There are no selling costs under perfect competition. Why?

All the firms in perfect competitive market produce homogeneous product. This implies that the product of each and every firm in the market is perfect substitute to others’ product in terms of quantity, quality, colour, size, features, etc. This indicates that the buyers are indifferent between the products of different firms. 

Now, selling costs are incurred when products of all the firms in a market can be differentiated from each other on the basis of their features, quantity etc. This is because if firms would incur selling costs even if they have homogenous products, their sales will rather decline due to increase in the price of their products as the burden of selling costs will be shifted on consumers. Hence, we can say that there are no selling costs in prefect competition because the products of different firms under perfect competition are homogenous.

In non-competitive markets, firms incur selling costs to increase their sales by differentiating their product from their competitors.

We would advice you to not to keep on piling your questions, rather, you should keep posting 1 to 2 questions per subject (Accountancy, Economics and Business Studies) on everyday basis. Ideally, you should go through the study material that is available on our website and look for the answers to the questions. This will not only help you to enhance your analytical abilities but also will help you to learn the application of your knowledge. In this manner, you will gain confidence and will help you in evaluating your preparation. ‚Äč

  • 0
What are you looking for?