The efficient number of firms refers to the optimal number of firms in a market that maximizes overall economic efficiency. It is the point where marginal cost equals marginal revenue.
Related terms
Economies of Scale: Economies of scale occur when a firm's average costs decrease as it increases its level of production.
Deadweight Loss: Deadweight loss represents the loss in consumer and producer surplus caused by inefficient resource allocation in a market.
Natural Monopoly: A natural monopoly happens when economies of scale allow one firm to produce at a lower cost than any potential competitors, leading to the existence of a monopoly in that market.