Although pure competition is relatively rare in the real world, this market structure is still relevant to many industries. As we learned in the current unit, in pure competition, entrepreneurs remove resources from industries that are generating economic losses in order to transfer them to the industries that are generating economic profits. This process leads to the highly efficient allocation of resources. In other words, the market competition help in moving resources to their best possible use.

The transformative effects of competition are often referred to as creative destruction which captures the idea that the creation of new products, and new production methods the market positions of firms committing to existing products and old ways of doing business. This process has nothing to do with how well the economy is doing. In other words, creative destruction can happen during both recessions as well as expansion phases of business cycles.

Please consider an industry or a firm or product that has disappeared from the market as a result of allocative efficiency and creative destruction and replaced by another industry or a firm or product. Discuss the pros and cons of this process for your choice of industry or a firm or product.

Suggest an industry or a firm or product that has disappeared; Suggest another industry or a firm or product that has replaced it; Prove the pros and cons of this process for your choice of industry or a firm or product.