Question

Compare the long-run outcome for a perfectly competitive market place vs. a monopoly one in terms of allocative efficiency. In what way is a monopoly less desirable for society than a perfectly competitive one?

Answer 1

A perfectly competitive firm in the long run will prodcue at the point where the price and MC are equal and at the lowest point of the ATC, this makes then both allocative and productive efficient.

a monopoly on the other hand will produce at the point where the ATC is sloping downward and price will be more than the marginal cost, this is both allocative and productive inefficient and creats a deadweight loss and wastage of resources in the market that is wy monopoly is not desirable in the long run.