ECON 1010 Lecture Notes - Pareto Efficiency, Dynamic Efficiency, Allocative Efficiency

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jadeplatypus42

29 Apr 2013

School

University of Manitoba

Department

Economics

Course

ECON 1010

Professor

Sarrah Vakili

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ECON 1010 Full Course Notes

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At the ruling market price, consumer and producer surplus are maximised. Some economists claim that perfect competition is not an optimal market structure for high levels of research and development spending and the resulting product and process innovations. Indeed it may be the case that monopolistic or oligopolistic markets are more effective in creating the environment for research and innovation to flourish. A cost-reducing innovation from one producer will, under the assumption of perfect information, be immediately and without cost transferred to all of the other suppliers. In this sense, a more competitive market can stimulate improvements in both static and dynamic efficiency over time. It is certainly one of the main themes running through the recent toughening-up of uk and european competition policy as this introductory passage to a competition white paper demonstrates: Competitive markets provide the best means of ensuring that the economy"s resources are put to their best use by encouraging enterprise and efficiency, and widening choice.

Related Questions

After learning about both the perfect competition model and more about real-world markets, which of these statements rings true?

a) Both real-world markets and the perfect competition model constantly obtain productive and allocative efficiencies

b) Real-world markets consistently produce at the minimum of average cost and equal to marginal cost, and the perfect competition model portrays and extremely of real-world markets

c) Real-world market firms are inconsistent with attaining productive or allocative efficiency while the perfect competition model, in the long run, is mostly a hypothetical benchmark

magentacoyote534

21)

Compared to the results in a perfectly competitive market, a monopoly does which of the following?

	It charges a higher price.
	It charges a price greater than the marginal cost.
	It produces less output.
	All of the above
	None of the above

22)

"X-inefficiency" refers to the idea that

	government restrictions on competition create a monopoly, which results in inefficiency.
	the cost of rent-seeking activity should be added to the welfare cost of monopoly.
	Generation X is less efficient due to a lack of competitive spirit.
	a lack of competitive pressure results in a monopoly not keeping its costs down to the lowest possible level.
	price discrimination results in inefficiently low cross-elasticities of demand.

23)

Firms in which of the following market structures can engage in price discrimination?

	monopoly
	oligopoly
	monopolistic competition
	All of the above
	None of the above

24)

Monopolistic competition and perfect competition are in all of the following ways except

	Barriers to entry are low in both
	There are many firms in both
	Firms in both produce the output level where MR=MC
	Nonprice competition is important in both

25)

To get rid of excess capacity from the monopolistic competition in the long run, what would have to be given up?

	Free entry and exit.
	economic rent
	resource allocative efficiency
	differentiated product
	productive efficiency

taupeant454

A perfectly competitive industry is initially in a short-run equilibrium in which all firms are earning zero economic profits but are operating below their minimum efficient scale. Explain the long-run adjustments that will create equilibrium with firms operating at their minimum efficient scale. Why is a perfect competitive firm associated with efficiency for both consumers and businesses?

aquamarinescorpion184

ECON 1010 Lecture Notes - Pareto Efficiency, Dynamic Efficiency, Allocative Efficiency

ECON 1010 Full Course Notes

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