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Where there are profits, there are firms, and where there are firms to produce identical goods and services, inevitably, there is competition. The degree of competition determines the market structure which is the main determinant of the behaviour or conduct of firms. This in turn determines the efficiency in the use of scarce resources. It is often argued that competition leads to a more efficient use of resources. I agree with the statement, but not totally. In my opinion, competition would lead to efficiency and best use of resource by encouraging firms to improve productivity, to reduce price and to innovate, but in certain industries, particularly industries where the impact of economies of scale is distinctive, for example industries with great indivisibilities, monopoly is more favourable...
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