Economic Efficiency:  

Because of the characteristics of Perfect competition, it is often used as a benchmark to compare with other market structures because it shows high levels of economic efficiency.

Allocative efficiency: In both the short and long run in perfect competition it can be seen that price is equal to marginal cost (P=MC) and thus allocative efficiency is achieved. At the ruling market price, consumer and producer surplus are maximized. No one can be made better off without making some other agent at least as worse off - i.e.,the conditions are in place for a Pareto optimum allocation of resources.

Productive efficiency: Productive efficiency occurs when the equilibrium output is produced with average cost at a minimum. This is not achieved in the short run, but is attained in the long run equilibrium for a perfectly competitive market.

Dynamic efficiency: It can be assumed that a perfectly competitive market produces homogeneous products - in other words, there is little scope for innovation designed purely to make products differentiated from each other and thereby allow a supplier to develop and then exploit a competitive advantage in the market to establish some monopoly power.

A "competitive market" (i.e., a contestable market) provides the discipline on firms to keep their costs under control, to seek to minimize wastage of scarce resources and to refrain from exploiting the consumer by setting high prices and enjoying high profit margins. In this sense, a more competitive market can stimulate improvements in both static and dynamic efficiency over time. A cost-reducing innovation from one producer will, under the assumption of perfect information, be immediately and without cost transferred to all of the other suppliers.

The long run of perfect competition, therefore, exhibits optimal levels of economic efficiency. But for this to be achieved all of the conditions of perfect competition must hold - including in related markets.