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perfect competition vs monopoly how efficient - Coggle Diagram
perfect competition vs monopoly how efficient
perfect competition
productive efficiency
the economy as a whole occurs when it is impossible to produce more of one good without producing less of another (P is minimised)
allocative efficincy
occurs when it is impossible to improve overall economic welfare by reallocating resources between markets. In the whole economy, price must equal marginal cost (P=MC) in every market
firms that are not being efficient will be removed from the industry
Characteristics of perfect competition
price takers
perfect knowledge
the seller or the buyer is unable to influence the market
homogeneous goods and services
no barriers to entry
many firms in the industry
monopoly
dynamic efficiency
measures improvements in productive efficiency that occur in the long run over time
chooses to be x-efficient
means that unnecessary production costs do not persist
characteristics of monopoly
price maker
only one firm in the industry
different goods and services
high barriers to entry
imperfect knowledge
the seller influences the market