Question

Check each of the following that may exist in oligopolies and monopolistic competition when compared to pure competition.

increased efficiency

higher costs

less efficiency

more output than pure competition

lower output than pure competition

lower costs to consumers

Answer 1

Increased efficiency

In perfect competition there is allocative efficiency since producer sets price equal to marginal cost. But this is not true in case of Oligopolies and monopolistic competition. There is not increased efficiency in oligopoly and monopolistic competition as compared to perfect competition.

Higher costs

The cost in oligopoly and monopolistic competitions are generally higher than what the cost is in perfect competition this is because oligopolies and monopolistic competition the form produces differentiated products for which they have to advertise. For Advertising they have to pay additionally and this is also a cost. Hence they are higher costs in oligopoly and monopolistic competition as compared to perfect competition.

Less efficiency

Yes there is less efficiency in both oligopolies and monopolistic competition as compared to perfect competition.

More output than pure competition

In perfect competition the output is the highest because the allocative efficiency is achieved. Therefore, there is not more output than perfect competition aur pure competition in oligopoly and monopolistic competition.

Lower output than pure competition

There is lower output in oligopoly and monopolistic competition than pure competition because in pure competition there is allocative efficiency which is not there in oligopoly and monopolistic competition.

Lower cost to consumers

the price charged in pure competition is lower than oligopoly and monopolistic competition. Hence there is lower cost to consumers in pure competition than oligopoly and monopolistic competition.

There is no lower cost to consumers in oligopoly and monopolistic competition as compared to pure competition.