A perfectly competitive firm is said to be more efficient than a monopoly firm because

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BlackTom AI · Accepted Answer

First, let's restate the question and the options to ensure clarity: A perfectly competitive firm is said to be more efficient than a monopoly firm because Select one:

a. perfectly competitive firms require their workers to work longer hours than monopoly firms.

b. perfectly competitive firms are faced with a less elastic demand curve than monopoly firms.

c. perfectly competitive firms produce more differentiated products than monopoly firms.

d. perfectly competitive firms charge lower prices and produce more output than monopoly firms.

Now, evaluate each choice:

Option a: 'perfectly competitive firms require their workers to work longer hours than monopoly firms.' This claim is not a standard basis for efficiency comparisons between market structures. Efficiency typically relates to output relative to inputs, costs, and prices, not the scheduling or length of worker hours. So this statement is incorrect on conceptual grounds.

Option b: 'perfectly competitive firms are faced with a less elastic demand curve than monopoly firms.' In a perfectly competitive market, firms face highly elastic (often horizontal) demand because many substitutes exist and individual firms are price takers. A monopoly faces a relatively inelastic demand since it is the sole supplier of the good. Therefore this option mischaracterizes the typical demand elasticities involved and is incorrect.

Option c: 'perfectly competitive firms produce more differentiated products than monopoly firms.' The opposite is generally true: monopolies often offer differentiated or unique products, while perfect competition tends to imply homogeneous products with many identical substitutes. So this option is incorrect.

Option d: 'perfectly competitive firms charge lower prices and produce more output than monopoly firms.' This aligns with the standard understanding of efficiency in economics: multiple small firms in perfect competition lead to prices driven down to marginal cost and higher total output, compared with a single-price setting by a monopoly that restricts output to raise price and maximize profit. Hence, this statement accurately captures the efficiency advantage of perfect competition over a monopoly.

In summary, the reasoning shows that only option d reflects the conventional efficiency comparison between perfectly competitive and monopoly structures, while options a, b, and cmisstate typical concepts about demand elasticity, product differentiation, or indicators of efficiency.}

MUF0061 Economics Unit 1 - Semester 2, 2025 Revision Quiz - Efficiency of Perfect Competition and Monopoly (10 - 12 minutes)

A perfectly competitive firm is said to be more efficient than a monopoly firm because

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