Final answer:
Firm coordination's efficiency over market competition can stem from avoiding redundant costs, leveraging large-scale production, and streamlining operations. Coordination is often easier and more profitable for firms, but government intervention is necessary to prevent potential monopolistic outcomes.
Step-by-step explanation:
Firm coordination can be more efficient than market competition for several reasons. In the context of the theory of the firm, analysts have learned that competition can offer consumers lower prices and a variety of innovative products. However, large-scale production can lower average costs significantly, and it's important to note that real-world markets are rarely perfectly competitive. Coordination between firms can make operations more streamlined and profitable. For instance, when two factory owners coordinate their activities as mentioned in Step 4, they have a higher incentive to do so because it is easy and profitable. This coordination can lead to better decision-making concerning attractive customers, efficient production, acquisitions, and mergers.
Despite the benefits of competition, there are situations where firm coordination improves efficiency by avoiding redundant costs, sharing technological advancements, and enhancing market presence. However, there is always a balance to be struck between the potential for monopolistic practices and efficiency gains, which is where government policymakers come into play to ensure that the potential loss of competition due to business growth and mergers doesn't negatively impact consumers.