A monopoly results in productive inefficiency because at the profit-maximizing output level,
A) P MC.
B) ATC is not at its minimum level.
C) MC is not at its minimum level.
D) P AVC.

Question

A monopoly results in productive inefficiency because at the profit-maximizing output level,
A) P > MC.
B) ATC is not at its minimum level.
C) MC is not at its minimum level.
D) P > AVC.

Quizplus · Accepted Answer

A monopoly results in productive inefficiency because it produces at a lower output level than the socially optimal level, which would be where ATC is at its minimum. Therefore, at the profit-maximizing output level, ATC is not at its minimum level, leading to productive inefficiency.

A Monopoly Results in Productive Inefficiency Because at the Profit-Maximizing