The diagram below shows supply,demand,and quantity exchanged of Monday matinee movie tickets.Assume it is a perfectly competitive market.
FIGURE 12- 4
-Monopoly is allocatively inefficient because
A)the firm has no incentive to maximize profits.
B)the opportunity cost exceeds the marginal cost of the last unit produced.
C)the marginal cost exceeds the average cost for the last unit produced.
D)the price exceeds the marginal cost of the last unit produced.
E)lower costs could be achieved.

Question

The diagram below shows supply,demand,and quantity exchanged of Monday matinee movie tickets.Assume it is a perfectly competitive market.
  FIGURE 12- 4
-Monopoly is allocatively inefficient because
A)the firm has no incentive to maximize profits. 
B)the opportunity cost exceeds the marginal cost of the last unit produced. 
C)the marginal cost exceeds the average cost for the last unit produced. 
D)the price exceeds the marginal cost of the last unit produced. 
E)lower costs could be achieved.

Quizplus · Accepted Answer

Monopoly is allocatively inefficient because it produces at a point where the price of the good is greater than the marginal cost of producing it. This means that the last unit produced generates more revenue than the cost of producing it, which results in a deadweight loss to society. Therefore, the correct answer is D) the price exceeds the marginal cost of the last unit produced.

The Diagram Below Shows Supply,demand,and Quantity Exchanged of Monday Matinee