1. Efficiency is defined in economics as achieving a goal using as few inputs as possible. Productive efficiency can be defined as achieving as much output as possible from a given amount of inputs or resources. Basically, productive efficiency is concerned with producing goods and services with the optimal combination of inputs to produce maximum outputs for the lowest possible cost. A company is productively efficient when it is producing at the lowest point on the cost curve, where marginal cost meets average cost. Allocative efficiency on the other hand, occurs when there is an optimal distribution of goods and services that take into account the consumer’s preferences. In allocative efficiency, the price equals the marginal cost of production. This is because the price that consumers are willing to pay is equivalent to the marginal utility they receive. Therefore, marginal utility of the good/service equals the marginal cost. Firms in perfect competition produce at an allocative …show more content…
In monopolistic competition, all firms only have a certain degree of market control. Unlike a monopolistic market, monopolistic competition offers very few barriers to entry. All firms are able to enter into a market if they choose to do so. In a monopolistic competition there is very little product differentiation. Products in monopolistic competition are close substitutes, but have some distinct features like branding. In a monopolistic competitive market, firms always set the price higher than their marginal cost which means that the market can never be productively efficient nor allocatively efficient. In my opinion, a monopolistically competitive market would be better for the welfare of the economy because consumers are able to find lower prices, there will be a greater variety of products available to consumers, and there would be greater efficiency and
Consumers would lose-out from increased competition in the short-run, however in the long-run consumers would ultimately benefit from increased competition. High levels of competition prevent businesses from abusing their market power, such as setting prices above or below what a perfectly competitive market would dictate to be at equilibrium and also encourages businesses to be innovative instead of becoming complacent, relying on consumer’s lack of choices.
I believe that we have too many monopolies in Canada because monopolies give the consumer less choice, lower quality service, and products and services can be more costly to the consumer. In my opinion, a market-based economy with fewer monopolies will benefit the consumer because companies will compete to give you the best deal possible to retain your business. In this environment the consumer will benefit most as a consumer, I
In a monopolistic structure, there is a high degree of competition but less perfect competition (Baker College, 2016). An oligopoly market where there is little competition but more than a monopoly. In a monopoly, firms face no competition (Baker College, 2016).
An oligopoly is defined as "a market structure in which only a few sellers offer similar or identical products" (Gans, King and Mankiw 1999, pp.-334). Since there are only a few sellers, the actions of any one firm in an oligopolistic market can have a large impact on the profits of all the other firms. Due to this, all the firms in an oligopolistic market are interdependent on one another. This relationship between the few sellers is what differentiates oligopolies from perfect competition and monopolies. Although firms in oligopolies have competitors, they do not face so much competition that they are price takers (as in perfect competition). Hence, they retain substantial control over the price they charge for their goods (characteristic of monopolies).
- Heyne, P. (n.d.). Efficiency. Library of Economics and Liberty. Retrieved April 14, 2014, from http://www.econlib.org/library/Enc/Efficiency.html
Efficiency is concerned with the optimal production and allocation of resources given existing factors of production while equity is concerned with how resources are distributed throughout society (Pettinger, 2010). The equity-efficiency trade-off is an economic situation in which there is a perceived tradeoff between the equity and efficiency of a given economy. This tradeoff is commonly viewed within the context of the production possibility frontier, where any additional gains in production efficiency must be offset by a reduction in the economy 's equity. Within this equity and efficiency tradeoff, equity refers to the economy 's financial capital, while efficiency refers to the future efficiency in the production of goods and services. This theory asserts that, in order for a nation to
Productivity is the quantity of output formed by one unit of production input in a unit of time. Inputs used in the production of the goods and services are the major determinants of any country’s productivity they are also called factors of production. There are four major determinants of productivity of any country’s economy.
Difference Between Oligopoly and Monopolistic Competition An oligopoly market structure is one in which there are a few large producers who are present in the industry and account for most of the output in the industry, there are many small firms but few large. firms dominate and have concentrated market share. Whereas monopolistic competition is a market structure that has a large number of sellers, each of which is relatively small and posse a very small market share. Another feature of an oligopoly is that there are some barriers to entry and exit into the industry.
Firms with market power or monopolies are often seen as detrimental for customers and economic welfare. According to the neoclassical theory, the market power of monopolies and oligopolies is potentially higher than that of firms in monopolistic or perfect competition since they have to face very limited competition, if any (Ferguson and Ferguson 1994). In monopolistic or perfect competition can make supernormal profits in the short term but eventually other firms will enter the market and offer alternative products that reduce the demand for the established firm’s products (Sloman et al., 2013 p. 177). Dissimilarly, this is not the case for dominant firms or monopolies; the lack of competition allows them to set prices and make supernormal profits increasing the perception that big companies are “bad” for consumers. As shown by the graphs in Figure 1 and 2, there are substantial differences in the competitive and monopoly markets. In a competitive environment, the equilibrium is reached where demand meets supply. In a monopolistic market, thanks to the establishment of higher prices and the production of lower quantities, monopolies or dominant firms make supernormal profits; additionally, there is a deadweight loss and some consumers who were willing to pay lower prices wil...
Monopolies have a tendency to be bad for the economy. Granted, there are some that are a necessity of life such as natural and legal monopolies. However, the article I have chosen to review is “America’s Monopolies are Holding Back the Economy (Lynn, 2017)” and the name speaks for itself.
Can you imagine the world with a limited amount of choices when it comes to purchasing different products and services? How does perfect competition and monopolistic competition differ and effect our buying power? As stated by Investopedia (2016), “Perfect competition is the opposite of a monopoly, in which only a single firm supplies a particular good or service, and that firm can charge whatever price it wants because consumers have no alternatives and it is difficult for would-be competitors to enter the marketplace (para 1)”.
Efficiency is highly prized in a culture turned toward productivity. It is therefore cultivated in contemporary business administration theories. It also tends to be prized above all other values in modern society, as society is more and more oriented toward technological advancement. Efficiency is also defined here as the most economic or the shortest or fastest or most simple way of realizing or achieving a goal with the least cost.
Market Efficiency In simple Microeconomics, market efficiency is the unbiased estimate of the actual value of the investment. The stock price can be greater than or less than its true value till the time these deviations are arbitrary. Market efficiency also states that even though an investor has got any kind of precise inside information, they will be unable to beat the market. Fama (1988) defines three levels of market efficiency.
With there being several firms for 3 of the markets, the consumer benefits as they can find the cheapest producer, resulting in the producer being at a disadvantage as they could loose business. In a perfect competition market, the firm is unable to choose the price whereas in an oligopoly the price is chosen by the firm this is beneficial for the producer as it increases their profit margins. However, this is harmful for consumers as they will have to pay the higher prices.
Organization performance is the performance effectiveness and the performance efficiency. The performance effectiveness is the measure of the task or goal accomplishment, it would be to what degree of a goal achieve. Managers who chose the right goals and achieve it can be say performance effectiveness. Besides, the performance efficiency is the measure of the resource cost associated for the goals, it would be how much of the resources are used and how productivity of resources. The more time and resources are saved in achieving goals, the most efficient production supervisor is.