I don't think PSG look any better than Liverpool. Their leagues are completely different and they have to make different efforts to win and be stable, so Liverpool are stronger in that respect because they have a competitive league. PSG, on the other hand, failed half of the season in terms of Champions League performances and were on the verge of relegation. Of course, if they suddenly beat Liverpool, it will be spectacular, but I think the chances of that are slim.
Sure, Liverpool has a better squad quality and they have a more competitive domestic league. If we consider these factors, no doubt that Liverpool is superior against PSG. However, it is UCL, it is not impossible that there is a surprise. Even PSG is a smaller team, PSG may have a chance to beat Liverpool if Liverpool can't perform at their best form. Lets' see the result of the first Leg in PSG home. I think first Leg will determine which team will have a bigger chance to qualify for the next round. If PSG can win in the first Leg, I assume they will have a chance to beat Liverpool. But if Liverpool can defeat PSG in the first Leg, I don't think PSG will have a chance to go to the next round.
PSG played an impressive game against Manchester City, but I think you know what the problem is about that result: Manchester City has changed and therefore it is not easy to categorize the performance PSG has shown. Was it because PSG was so good or was it because Manchester City was so bad? Maybe it was a bit of both, but other than that I agree that league competitiveness will come into play and Liverpool has such a strong belief in themselves due to what happened in the past in the Champions League. If they lose 1-2 in the first game, Liverpool knows they can come back from any result. The memories of their game against Barcelona when they were down 0-3 after the first game will never vanish and that is something they can benefit from till today. PSG can't. If they lose the first game, the same thing will happen and you immediately see how they lose trust in themselves.