Liverpool is indeed a better team than PSG.
They had a bad night, and they lost in the penalty lottery, anything can happen there.
Real Madrid was close in losing too, and Juventus lost with PSV.
Penalties are just a lottery...
I don't believe I'll consider Liverpool to be a better team than PSG, have you seen the squad that PSG has put together for this season? They have the funds to get whatever expensive players they prefer, and they gather the greatest players who are ready to play for the team. Which midfield does Liverpool have to compete at the top of the league and the Champions League? Mac Allister, Szoboszlai, and Gravenberch can only perform well in the Premier League when compared to PSG; which currently has one of the best midfielders in the world.
In my opinion, Liverpool was lucky in the game, they would not have been able to reach the penalty shootout since PSG dominated them. Furthermore, Juventus was not eliminated in the penalty shootout against PSV, but, because of a lack of consistency, they were unable to maintain their winning way throughout the game and were eliminated in the extra minutes of the second leg.
You wouldn't say PSG was a better team than Liverpool in this season's UCL. They might have enough funds and dominate the French League, but they have not been able to be successful in European competitions. Liverpool lost just one game in the UCL, while PSG struggled to qualify for the knockout stage through the playoffs.
From my observations, Liverpool's standard dropped slightly towards the end of the group stage. When they lost to PSV Eindhoven, it showed that their quality had decreased. But I wouldn't deny that PSG was far better than Liverpool in the knockout games. Maybe it is time for PSG to make an impact at UCL.