Evidence suggests that as the amount of market power possessed by the firms in an industry increases,the amount of X-inefficiency will decrease.

Question

Quizplus · Accepted Answer

X-inefficiency refers to the inefficiency that arises due to a lack of competition in the market. As the amount of market power possessed by the firms in an industry increases, the likelihood of X-inefficiency also increases as these firms are able to exercise their market power to limit competition and maintain their profits, often leading to a reduction in efficiency. Therefore, the statement is false.

Evidence Suggests That as the Amount of Market Power Possessed