Economic efficiencies and market structures

Question 1

Allocative efficiency in a contestable market?

Answer 1

High, treat or actual competition lead to price close to MC

Question 2

Productive efficiency in a contestable market

Answer 2

High, competitive pressure keeps costs low

Question 3

Dynamic efficiency in a contestable market

Answer 3

High, especially for new entrants, creative destruction,

Question 4

Allocative efficiency for a monopoly

Answer 4

P>MC therefore not allocative efficient and deadweight welfare loss to society, however benefits through price discrimination and cross subsidies

Question 5

Productive efficiency in a monopoly

Answer 5

Scope for economies of scale (especially natural monopoly), however lack of competition might lead to x-inefficiency,

Question 6

Dynamic efficiency in a monopoly

Answer 6

Supernormal profits allow dynamic efficiency

Question 7

Allocative efficiency in an oligopoly

Answer 7

P>MC hence not allocatively efficient, threat of collusion,

Question 8

Productive efficiency from oligopolies

Answer 8

Possibility of scale economies but lack of competition might lead to x-inefficiency

Question 9

Dynamic efficiency in an oligopoly

Answer 9

High, non-price competition and contestable oligopolies make dynamic efficiency very likely