Quick Tip on Monopoly vs PC: Allocative and Productive Efficiency

This video goes through a step-by-step analysis of how the equilibrium output and price is determined under the Monopoly and Perfect Competition.

The performance of these two market structures are also explored in terms of their ability to achieve allocative efficiency and productive efficiency.


Allocative efficiency refers to an efficient allocation of resources where societal welfare is maximized. The condition for this to occur is where Price = Marginal Cost (P=MC).

Productive efficiency refers to the production of good using the least-cost combination of input. The condition for this to be fulfilled is at minimum Long Run Average Cost curve (min LRAC).

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