In principle, a comparison of the long- run equilibrium of competitive and (single- price) monopoly industries leads to the following conclusion:
A) the competitive industry is consistent with allocative efficiency whereas the monopoly is not.
B) neither industry is capable of allocative efficiency.
C) the competitive industry will achieve productive efficiency but the monopoly will not.
D) both the competitive industry and the monopoly will allocate resources inefficiently.
E) both the competitive industry and the monopoly will allocate resources efficiently.

Question

Quizplus · Accepted Answer

The long-run equilibrium of a competitive industry is consistent with allocative efficiency, meaning that resources are allocated in the most efficient way possible, while the same cannot be said for a monopoly industry. In a monopoly, the firm has market power and can charge a higher price than in a competitive market, resulting in a deadweight loss and a failure of allocative efficiency.

In Principle, a Comparison of the Long- Run Equilibrium of Competitive