If one of the agents in an Edgeworth Box has monopoly power and maximizes profit as the sole seller, then the economic outcome is:
A) inefficient because the monopoly has no incentive to be technically efficient.
B) inefficient because the monopoly produces less than the optimal amount of output.
C) Both A and B are correct.
D) none of the above

Question

Quizplus · Accepted Answer

When a monopoly has market power, it can restrict output to increase prices and profits. As a result, the monopoly produces less than the socially optimal level of output, leading to inefficiency. However, it is not necessarily true that monopolies have no incentive to be technically efficient.

If One of the Agents in an Edgeworth Box Has