Which of the following can lead to an inefficient outcome? I.Price regulations
II.Increasing marginal cost
III.Monopoly
A)I only
B)II only
C)I and III
D)III only
E)I,II,and III

Question

Quizplus · Accepted Answer

Price regulations can lead to inefficient outcomes by distorting market signals and leading to shortages or surpluses. Monopolies can lead to inefficient outcomes by restricting output and charging higher prices than would be charged in a competitive market. Increasing marginal cost can lead to higher prices and reduced output, also leading to inefficient outcomes. Therefore, options I and III can lead to inefficient outcomes. Option II alone may not necessarily lead to inefficiency without considering other market factors.

Which of the Following Can Lead to an Inefficient Outcome