Perfect Competition vs. Monopoly

allocative efficiency, incentive for efficiency, greater consumer surplus, responsiveness to demand, productive efficiency

Argument for perfect competition

consumer, P = MC, underproduction, higher

Allocative efficiency in perfect competition:

Perfect competition allocates resources based on _______ demand, with firms producing where ___ = ___. Monopoly pricing leads to __________ and ______ prices(P>MC)

entrants, efficient, complacent

Incentive for efficiency in perfect competition:

The constant threat of new ______ in perfect competition keeps firms ________, unlike monopolies that may become ____________

down, output, maximising, choice

Greater Consumer surplus in perfect competition:

Perfect competition drives prices ____ and ____ up, _________ the benefit consumers receive from lower prices and greater _______, unlike monopolies.

quickly, pressure, slow, unresponsive

Responsiveness to demand in perfect competition:

Competitive firms adapt _____ to consumer needs due to the ________ of rivals, while monopolies can be ____ and ___________

minimum AC

Productive efficiency in perfect competition:

Competitive firms produce at the lowest cost(________ ___), minimising waste. Monopolies lack this pressure, often resulting in higher costs and inefficiency.

natural monopoly, sustainability in high RnD sectors, dynamic efficiency, EofS, consumer protection via regulation

Arguments for monopoly

fixed, single, efficient, duplicating

Natural monopoly efficiency more preferable than perfect competition:

In industries with high ____ costs(e.g. utilities), a ______ provider can be more ______ than multiple firms _________ resources

upfront, continuous, pharmaceuticals

Sustainability in High RnD sectors in monopoly:

Monopolies can recover high _____ costs, supporting _______ innovation, especially in sectors like ___________.

reinvest, products, profits

Dynamic efficiency in monopoly:

Monopolies can ______ profits in innovation and RnD, benefiting consumers with new _______, unlike firms with lower _____ in perfect competition.

large, long-term

EofS in monopoly:

Monopolies can lower costs by operating at ____ scale, potentially reducing ____-_____ prices more than fragmented competitive firms

efficiency, protections, fragmentation

Consumer protection via regulation in monopoly:

A regulated monopoly can balance large-scale _______ with consumer _______, offering a better outcome than competitive _____________.