Which of the following statements is correct?
A)Monopoly firms tend to be more internally efficient than competitive firms because they have a single goal of profit maximization.
B)Monopoly firms are sheltered from competitive forces, and such an environment makes them subject to X-inefficiency.
C)Monopoly firms are in industries with low barriers to entry that tend to lower the cost of producing products.
D)Competitive firms tend to be more efficient than monopolist firms because they maximize per unit profits, not total profits.

Question

Quizplus · Accepted Answer

Monopoly firms, being sheltered from competitive forces, may not have the same incentives to minimize costs or innovate as firms in competitive markets, leading to X-inefficiency, where a firm's actual output is less than the potential output.

Which of the Following Statements Is Correct