A monopolist produces an efficient quantity of output but it is still inefficient because it charges a price that exceeds marginal cost and the resulting profit is a social cost.

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A monopolist does not produce an efficient quantity of output; it produces less than the socially optimal quantity because it maximizes profit where marginal cost equals marginal revenue, not where price equals marginal cost. The resulting profit is not a social cost, but the reduced output and higher price lead to a deadweight loss, which is the true social cost.

A Monopolist Produces an Efficient Quantity of Output but It