Economics Perfect Competition Questions
In an oligopoly market structure, there is a limited number of firms that dominate the market. The relationship between oligopoly and productive efficiency is complex and can vary.
On one hand, oligopolistic firms may have the potential to achieve productive efficiency due to their large scale of operations and economies of scale. These firms can benefit from lower average costs and higher levels of production, leading to efficient allocation of resources.
On the other hand, oligopolies often engage in non-price competition, such as advertising or product differentiation, which can lead to higher costs and reduced productive efficiency. Additionally, the presence of barriers to entry in oligopoly markets can limit competition and hinder the drive for efficiency.
Overall, the relationship between oligopoly and productive efficiency is influenced by various factors, including market structure, firm behavior, and industry characteristics.