ew organizational structures (i.e., virtual rather than physical sales outlets and new distribution channels) and new ways of allocating capital and other resources, making investment decisions, and assessing profitability and loss.
Economists regard an "efficient market" as one that is characterized by pure - or nearly perfect - competition; alternatively, a monopoly can also realize efficiency (Gwartney & Stroup, 1990). In an ideal and efficient market, costs of production are minimized and profit maximizing producers produce the goods that consumers desire most. In the purely competitive market, the "iron hand" of which Adam Smith spoke is seen as doing its job well. The actions of producers who are motivated purely by the desire to make a profit are the same as if they cared about the efficient satisfaction of consumer needs. An incredibly complex array of consumer desires, production possibilities, and resource availabilities can be optimally coordinated in the model (Gwartney & Stroup, 1990). Competition is seen as motivating producers to produce efficiently, and rewards those who produce what consumers desire most urgently (relative to costs of production). Competitive forces are consistent with economic efficiency, and even in the real-world imperfectly competitive markets, efficiency is a desirable and attainable goal.
A perfect market, in theory, would be efficient because it would allow all buyers and sellers to meet together, with full information about supply and demand. Under perfect competition, equilibrium is reached when marginal cost=marginal revenue=short-run average total cost=long-run average total cost (Solomon, 1980). There would be no barriers to entering or leaving the market, and every potential buyer would be matched with a supplier able to meet his needs (The Economist, 2000). Prices would be at exactly the level capable of keeping supply and demand in steady state equilibrium, and "transaction ...