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Write 5 page essay on the topic Compare the efficiency outcomes of the model of perfect competition with that of monopoly markets. Discuss and evaluate the gove.Perfect Competition Perfect competition
Write 5 page essay on the topic Compare the efficiency outcomes of the model of perfect competition with that of monopoly markets. Discuss and evaluate the gove.
Perfect Competition Perfect competition is a model of market structure which attains what can one call efficient distribution of scarce resources. Such efficient allocation is attained due to the profit-maximizing level of goods manufactured by a seamlessly aggressive company results in the marginal cost and price becoming equal (Stigler 1957). As far as short run is concerned, this includes the short-run marginal cost and price being equal. On the other hand, in the longer duration this is observed with the parity between price and long-run marginal cost. In the short run the production of a homogenous product being produced by many other firms is efficient since the price is the same as marginal cost (Mankiw 2003). In other words the worth of the homogeneous product manufacturing is equivalent to the marginal cost of sacrificed satisfaction. Perfect competition creates efficient allocation of resources in the long run also. The long-run fine-tuning of companies arriving and leaving the industry as each of the companies in the business maximizes profits hence creating the subsequent long-run equilibrium state: P = SRMC = LRMC = SRAC = LRAC (Latzko 2012) Graphs above are showing perfect competition.