Monopoly...is a great enemy to good management. Adam Smith, (1776), Essay

Monopoly...is a great enemy to good management. Adam Smith, (1776), The Wealth of Nations, Book I, Chapter XI. Discuss - Essay Example In the light of this statement therefore this question involves the discussion of the various market structures and their contribution to the achievement of the highest possible level of allocative and productive efficiency (in both static and dynamic senses).The question already suggests that the Monopolised market structure is not conducive to â€Å"good management† or efficient resource allocation. Resource allocation in a modern economy demands allocative efficiency which means that resources should be allocated to match the wants of society. Essentially this would mean a point of allocation where no redistribution would enable one individual to be made better off without making someone else worse off. Allocative efficiency would therefore consider both the consumer (demand) and the producer (supply) and that it should satisfy the needs of both. This essay will mainly discuss the two main extremes of competing market structures i.e. monopoly and perfect competition and to a slightly lesser extent similar models along the vast range of economic models falling halfway between these extremes for example Oligopolies. Perfect Competition represents the efficiency achieved by an industry which has extensive competition and almost no interference in the market forces either by the sellers or buyers or the government. Monopoly on the other hand represents a rather inefficient means of market structure characterised by lack of competition and extensive market control. 3.The reason the statement by Adam Smith seems to resent Monopoly power is because of the complete market control by the monopolist who as the only seller in the market will control the supply of goods in the market and is able to influence the price of its product sometimes in an unfair way. Perfect competition, in contrast is preferred in this regard as a market structure where each firm has neither got any significant