Ryoken
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I need some help on this question.

''Discuss whether perfect competition is more efficient than monopoly. Under what circumstances monopoly can be as efficient as perfect competition.''

I can't think of any real life examples where a monoploy is seen as efficient as pc. If anyone can give pointers on how to answer the question that will be good. Thanks
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keynes24
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(Original post by Ryoken)
I need some help on this question.

''Discuss whether perfect competition is more efficient than monopoly. Under what circumstances monopoly can be as efficient as perfect competition.''

I can't think of any real life examples where a monoploy is seen as efficient as pc. If anyone can give pointers on how to answer the question that will be good. Thanks
It cannot be as efficient as the conditions of perfect competition do not hold in real life. You can refer to contestability and how it could lead to greater economic efficiency.
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Estarrre
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PERFECT COMPETITION MORE EFFICIENT:
-Produce at the point of productive efficiency (MC=AC)
-Produce at the point of allocative efficiency (MC=AR)
-Price takers so no deadweight loss to society
-Increased competition due to the ease of exit and entry to the market

MONOPOLY MORE EFFICIENT:
-Dynamic efficiency due to supernormal profits (invested into R&D)
-Economies of scale means monopolies have a much lower MC curve which could actually lead to lower prices and increased output
-Natural monopolies would be more efficient due to the downward sloping average cost curve in the long run meaning a low minimum efficient scale

These are just some of my ideas so please add to or contend with them
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keynes24
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(Original post by Estarrre)
PERFECT COMPETITION MORE EFFICIENT:
-Produce at the point of productive efficiency (MC=AC)
-Produce at the point of allocative efficiency (MC=AR)
-Price takers so no deadweight loss to society
-Increased competition due to the ease of exit and entry to the market

MONOPOLY MORE EFFICIENT:
-Dynamic efficiency due to supernormal profits (invested into R&D)
-Economies of scale means monopolies have a much lower MC curve which could actually lead to lower prices and increased output
-Natural monopolies would be more efficient due to the downward sloping average cost curve in the long run meaning a low minimum efficient scale

These are just some of my ideas so please add to or contend with them
Perfect competition is only considered productive efficient in the long run.
Economies of Scale is based on LRAC (not MC) and you need to refer to economic efficiency either fall in LRAC causing productive efficiency or lower prices taking the industry closer to allocative efficiency.
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