Question

Explain why perfect competition results in economic efficiency. Does a monopoly result in economic efficiency?

Answer 1

Firstly let us clear with the term economic efficiency

The economic efficiency is optimum use of resourse for the outcome with minimum input . It helps in production at lowest rate possible with highest input

This phenomena can also be seen in the case of Perfect competition where-

1Large number of buyers and sellers

2No price discrmination

3 products are same in color ,size ,shape etc

So here economic efficiency can be achieved .

But in case of monopoly where there is only one seller and large number of buyers,this can not be seen as less number of producers are there so less production with huge demand reduces the efficiency.So no economic efficiency in MONOPOLY.