ABSTRACT
In an effort to simplify matters, economists usually describe the above extremes those of zero and very substantial mark-ups by using the expressions perfect competition and monopoly. Perfect competition refers to situations in which all firms are unable to sell their products at a price above their minimum average cost, since they would lose all their customers. Production is thus cost-efficient, and consumers succeed in appropriating the whole surplus. This chapter looks relatively simple, and it is easy to understand why public opinion cherishes the perfectly competitive ideal rather than monopolies: perfect competition is cost-efficient and maximises consumer's surplus. Regrettably, more important than these static inefficiencies is the fact that rent-seeking kills competition and that by frustrating innovation and discouraging entrepreneurship; it ends up slowing down the creation of wealth. The chapter draws attention to the shortcomings of the traditional benchmark and it alerts the reader to the presence of.
