A monopoly sets a market price that is higher than the marginal cost of production. This fact implies that a monopoly's allocation of resources is:
A) unfair.
B) inefficient.
C) discriminatory.
D) excessive.

Question

Quizplus · Accepted Answer

A monopoly's ability to set a price higher than marginal cost of production means that they are producing less than the socially optimal level of output. This leads to an inefficient allocation of resources as there is a deadweight loss (lost surplus) to society.

A Monopoly Sets a Market Price That Is Higher Than