In which one of the following market models is X-inefficiency most likely to be the greatest?
A) pure competition
B) oligopoly
C) monopolistic competition
D) pure monopoly

Question

Quizplus · Accepted Answer

X-inefficiency occurs when a firm produces output at a higher cost than necessary. This is most likely to occur in a pure monopoly market structure since there is no competition to drive firms to be efficient. As a result, monopolies have less of an incentive to reduce costs and improve efficiency.

In Which One of the Following Market Models Is X-Inefficiency