Economics Perfect Competition Questions
In a monopoly, there is a lack of competition as there is only one firm in the market. This lack of competition can lead to a decrease in productive efficiency. Monopolies often have less incentive to be efficient in their production processes as they face limited or no competition. Without the pressure to minimize costs and improve efficiency, monopolies may not operate at the lowest possible average cost of production. Therefore, the relationship between monopoly and productive efficiency is that monopolies tend to have lower levels of productive efficiency compared to perfectly competitive markets.