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