A single-price pure monopoly is economically inefficient
A) only because it produces beyond the point of minimum average total cost.
B) only because it produces short of the point of minimum average total cost.
C) because it produces short of minimum average total cost and price is greater than marginal cost.
D) because it produces beyond minimum average total cost and marginal cost is greater than price.

Question

Quizplus · Accepted Answer

A single-price pure monopoly is economically inefficient because it produces short of minimum average total cost and price is greater than marginal cost. This means that the monopolist could produce at a lower cost but chooses not to, and charges a higher price than what would be considered socially efficient. As a result, consumer surplus is reduced and deadweight loss is created.

A Single-Price Pure Monopoly Is Economically Inefficient