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ECONOMIC’S ESSAY “Discuss and evaluate the proposition that perfect competition is a more efficient market structure than monopoly.” Adam Smith said that competitive forces function like an “invisible hand” to ensure that people pursuing individual interests simultaneously serve interest of society. Competition among economic agents would therefore narrow selfish interest of each person in a sociable desirable direction . Therefore perfect competition would lead allocative or economic efficiency. On the other hand monopolies could lead to lower cost due to economies of scale. Although in the real world it is very difficult (almost impossible) to have a pure perfect competition or monopoly, both of them, in theory, bring benefits to society. In order to evaluate whether perfect competition is a more efficient market structure than monopoly, there has to be a direct comparison between the two market structures to draw conclusions. In theory, the existence of positive economic profits in any given industry attracts new firms, therefore the supply increases and the price lowers to the point where normal returns are earned by the representative firm. Perfect competition is a market model. It has various character