Advantages

- Allocative efficiency is achieved through perfect competition where P = MC in both short run and long run because demand is perfectly elastic and overlaps with price. This results in maximum social welfare and is considered to be the socially optimal point without the presence of externalities.

- Productive efficiency is achieved through perfect competition in the long run as well because firms always produce at the lowest point of the ATC in the long run, which is because firms always make normal profit in the long run. Thus, a situation arises where the firms are producing an optimal quantity with the lowest possible average cost.

- Consumers are benefited the most in this market structure because they have greater quantity and lower price in comparison to other forms of market structures that involve imperfect competition.

- Competition leads to the closing down of inefficient producers, whose incompetency potentially results from unproductive labor, outdated technology, or poor entrepreneurship. In the long run, when other efficient firms are making normal profit, these firms will make losses due to their relative incompetency. They will have to leave the industry, which is beneficial to the market as a whole.

Disadvantages
- Assumptions of this market structure are hardly met in reality.

- Firms cannot enjoy economies of scale because firms in perfect competition are small. They have to produce at a higher cost than the monopoly. When transmitted to the consumers, it is possible that perfect competition may lead to a price higher than that of monopoly, especially in industries that foster natural monopolies.

- Products are undifferentiated in this market structure because every firm is producing homogenous products. This may not be entirely beneficial to consumers who appreciate having a variety of products from which they can choose.

- Since firms in perfect competition are small and can only make normal profit in the long run, it is almost impossible for them to engage in research and development in pursuit of innovating new technologies. It is unlikely for them to pursue R&D anyway because products are all undifferentiated.