MYTUTOR SUBJECT ANSWERS

565 views

What is the best market structure?

In Economics, we tend to think of "best" as synonymous with "most efficient." There are many different types of efficiency, but the most important of them are allocative and productive efficiency, since they indicate the degree to which goods and services are produced and sold at the lowest possible price. Intuitively, perfectly competitive markets seem the best equipped to manage this, since, in the long run, the absence of firms with market power and the availability of perfect information mean that price equals marginal cost (the condition for allocative efficiency) and production is capped at the point where average total cost is at its lowest (the condition for productive efficiency). However, the assumptions of perfect competition, such as perfect information and complete absence of barriers to entry, are unrealistic. Furthermore, whilst monopolistic markets are neither allocatively nor productively efficient, their firms often benefit from economies of scale, since their privileged positions allow them to increase their size. This can shift their cost curves downwards, allowing them to produce and sell their product at lower prices than their perfectly competitive counterparts. Therefore, whilst monopolistic markets remain allocatively and productively inefficient in absolute terms, they can be relatively more efficient than others, if they take advantage of their economies of scale. (I would only target this at a fairly advanced student, as it is higher level analysis / evaluation.) 

Daniel E. Uni Admissions Test .TSA. Oxford. tutor, A Level Economics ...

2 years ago

Answered by Daniel, an A Level Economics tutor with MyTutor


Still stuck? Get one-to-one help from a personally interviewed subject specialist

68 SUBJECT SPECIALISTS

£24 /hr

Nicolo G.

Degree: BSc Government and Economics (Bachelors) - LSE University

Subjects offered:Economics, Maths+ 2 more

Economics
Maths
History
Biology

“I am currently a student of economics and government at the London School of Economics. I developed a passion for economics during my IB diploma studies and I hope I will be able to instill that passion in you as well. I am very patien...”

£36 /hr

Anne H.

Degree: History (Bachelors) - Durham University

Subjects offered:Economics, History+ 2 more

Economics
History
English
-Personal Statements-

“Hi, my name is Anne and I'm a second year at Durham university specializing in economic history.”

£20 /hr

Oscar A.

Degree: Politics, Philosophy and Economics (Bachelors) - Oxford, Balliol College University

Subjects offered:Economics, -Oxbridge Preparation-

Economics
-Oxbridge Preparation-

“I am a second-year undergraduate studying PPE at Balliol college, Oxford. I am friendly, with a real passion for my subjects, which I hope to bring to my pupils. I spent 2 weeks teaching English and some French to refugees in the Cala...”

About the author

Daniel E.

Currently unavailable:

Degree: PPE (Philosophy, Politics and Economics) (Bachelors) - Oxford, Lincoln College University

Subjects offered:Economics, Maths+ 2 more

Economics
Maths
.TSA. Oxford.
-Personal Statements-

“About me: Hi, my name is Dan and I'm studying PPE (Philosophy, Politics and Economics) at Oxford University. At school, I did Cambridge Pre Us and attained D1s (A*+ equivalent at A-Level) in Maths, Economics and Russian and a D2 (A* eq...”

You may also like...

Other A Level Economics questions

What is a Pigouvian Tax?

What is meant by an oligopoly being both interdependent and uncertain in their price strategies?

Explain how a company would set a price if their aim was to profit maximise.

How can I effectively use graphs in my essay?

View A Level Economics tutors

We use cookies to improve your site experience. By continuing to use this website, we'll assume that you're OK with this. Dismiss

mtw:mercury1:status:ok