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The Relative Efficiency of Monopoly - Essay Example

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The paper "The Relative Efficiency of Monopoly" concerns that monopolies are less efficient when we evaluate them against a perfectly competitive structure under standard assumptions. But accepting the non-viability of such a perfectly competitive structure does open up the question once we note the greater potential efficiency losses associated with collusions and cartels…
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The Relative Efficiency of Monopoly
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Download file to see previous pages Such Interpretation of the notion of ‘good management’ as being equivalent to maximization of ‘efficiency’ implicates the quoted lines as being accusatory about monopoly market structures by pointing out that these forms of markets greatly hinder the generation and sustenance of ‘efficiency’. The essential objective of the present discussion is to explore the relation of ‘efficiency’ with monopoly itself to examine the validity of the statement in question. In pursuit of this objective, we shall first explore the concept of ‘efficiency’ to perceive its interpretability as ‘good management’ before comparatively exploring monopoly and perfect competition to assess the relative enmity these market structures exhibit to efficiency and then briefly look at certain oligopoly setups and their relation to efficiency to facilitate a greater comparative understanding of how much hindrance monopoly market forms actually cause to generation and maintenance of efficiency relative to alternative market structures.
In economics, achieving efficiency in a very broad and general sense implies attaining a state that ensures the minimum amount of resource wastage. Although efficiency is a concept that encompasses a very broad spectrum of notions, we shall restrict our concern primarily to two types of efficiencies - productive or technological efficiency and allocative efficiency which I believe to be pertinent for the perception of the notion of ‘good management’ of society. Productive efficiency is attained if the costs of production are minimized, given the amount of output or if given the costs of producing the output is maximized (Varian, 1999).
If a firm is able to produce a given level of output at the minimum possible average cost it is said to be productively efficient and this is reflected in the firm operating on its cost curves curve as these show the minimum level of costs at which any given level of output can be produced by the firm1. ...Download file to see next pagesRead More
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