Which are more economically? efficient, perfectly competitive markets or? monopolies?

Question:

Which are more economically efficient: Perfectly competitive markets or monopolies?

Efficiency:

A market is said to operate efficiently when the supply of goods and services matches the demand for those goods and services. When the market is inefficient, it produces surpluses and shortages of goods and services.

Answer and Explanation:

Perfectly competitive markets are more economically efficient than monopolies.

In a competitive marketplace, firms have extra incentives to become efficient in production and lower the chances that there will be wasteful overproduction that causes losses or shortages which leave potential profits on the table. In a monopoly, there are fewer economic costs for producing a surplus and no other firm will take away business if the monopoly produces a shortage.


Learn more about this topic:

Loading...
Natural Monopoly in Economics: Definition & Examples

from Intro to Business: Help and Review

Chapter 3 / Lesson 13
80K

Related to this Question

Explore our homework questions and answers library