Market models such as pure competition and pure monopoly are useful in evaluating the economic efficiency of an industry.Question 11Select one:TrueFalse

Answer to the Question

Market models like pure competition and pure monopoly serve as idealized frameworks for understanding how different market structures function and their implications for economic efficiency. In a purely competitive market, numerous firms sell identical products, leading to optimal resource allocation. Prices are determined by supply and demand, resulting in allocative and productive efficiency.

In contrast, a pure monopoly exists when a single firm dominates the market without close substitutes. This can lead to reduced output and higher prices compared to competitive markets, indicating a loss of economic efficiency.

Conclusion

Therefore, the statement is True; these models are valuable for evaluating the economic efficiency of various industries. They provide insights into how market structures can affect consumer welfare, prices, and overall market performance.