Match each market structure on the left with its corresponding long-run economic efficienc… — JAMB UTME

Match each market structure on the left with its corresponding long-run economic efficiency condition or consumer welfare outcome on the right.

Perfect CompetitionAchieves both allocative efficiency ( $P = MC$ ) and productive efficiency ( $P = \text{minimum } ATC$ ) in long-run equilibrium.
Pure MonopolyCauses allocative inefficiency ( $P > MC$ ) and a deadweight welfare loss while earning long-run economic profit protected by entry barriers.
Monopolistic CompetitionOperates with excess capacity in the long run ( $P > MC$ and $P > \text{minimum } ATC$ ) despite earning zero economic profit due to free entry.

Cevap

Perfect Competition corresponds to achieving both allocative (

P = MC

) and productive (

P = \text{minimum } ATC

) efficiency. Pure Monopoly corresponds to allocative inefficiency (

P > MC

) and deadweight loss with protected economic profits. Monopolistic Competition corresponds to operating with excess capacity (

P > MC

and

P > \text{minimum } ATC

) alongside zero long-run economic profit.

Perfect competition achieves full economic efficiency (

P = MC = \text{minimum } ATC

). Pure monopoly causes allocative inefficiency (

P > MC

) and deadweight loss protected by entry barriers. Monopolistic competition results in excess capacity and allocative inefficiency despite earning zero economic profit in the long run due to free entry.

Adım Adım Çözüm

Analyze the long-run efficiency criteria for Perfect Competition.

Firms are price takers facing a horizontal demand curve (

P = MR

). Long-run equilibrium occurs where

P = MR = MC = \text{minimum } ATC

, satisfying both allocative and productive efficiency.

Free entry/exit forces price down to the minimum point of the average total cost curve, while profit maximization ensures

P = MC

Analyze the long-run efficiency criteria for Pure Monopoly.

Monopolists face a downward-sloping market demand curve (

P > MR

). Profit maximization at

MR = MC

results in

P > MC

, which causes deadweight loss and misallocation of resources.

High barriers to entry allow the monopolist to sustain economic profits in the long run while charging a price above marginal cost.

Analyze the long-run efficiency criteria for Monopolistic Competition.

Free entry drives economic profit to zero (

P = ATC

), but product differentiation yields a downward-sloping demand curve. The tangent point with

ATC

occurs on its falling portion, causing excess capacity (

P > MC

and

P > \text{minimum } ATC

Firms produce less than the output level that minimizes average total cost, sacrificing productive efficiency for product variety.

Anahtar Kavram

Economic Efficiency and Consumer Welfare Across Market Structures

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