Imperfectly competitive firms may allocate resources inefficiently because they produce at a level of output where:
A)average total cost is at its lowest point.
B)price equals marginal cost.
C)marginal revenue is greater than marginal cost.
D)price is greater than marginal cost.

Question

Quizplus · Accepted Answer

When price is greater than marginal cost, the firm has an incentive to produce more output than is socially optimal, leading to allocative inefficiency.

Imperfectly Competitive Firms May Allocate Resources Inefficiently Because They Produce