Question

In: Economics

Briefly state what you believe is the single most important beneficial (advantageous) consequence of having markets...

Briefly state what you believe is the single most important beneficial (advantageous) consequence of having markets that are purely competitive (PC), and the single most positive consequence of Monopoly markets (and for whom--consumers, producers, society)?

Solutions

Expert Solution

Pure competition :

  • Pure competition or perfect competition is a market structure characterized by many firms and buyers competing with each other and selling identical product's.
  • The single most and the most important beneficial consequence or the advantage of having purely competitive markets is that these market's allow high competition in the absence of barriers to entry and exit. Due to heavy competition, no single firm can practice monopoly power and they cannot influence the market prices nor can they earn super normal profits more than other firms in the market.
  • This gives customers wide varieties of choices and they are protected from monoply level of pricing.

Monopoly :

  • Monopoly market refers to a market structure characterized by a single firm selling unique products and has significant barriers of entry to prevent competitor's from entering into the market.
  • Even though a monopoly market is said to have many drawbacks compared to other firms, its single most positive consequence is greater economies of scale.
  • A monopoly power can help a monopolist in earning super normal profits by producing more goods and services at a lower cost of production. This allows producers to become more successful and compete in international markets by greater investments in R&D fields.
  • Thus a monopoly power is most likely said to benefit producer's of goods and services.

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