Choose the statement that best compares the long-run equilibrium of a competitive industry with that in a monopolized industry (with a single price).
A)Resources will be allocated efficiently in both the competitive and monopolized industries.
B)Allocative efficiency will be achieved in the competitive,but not the monopolized industry.
C)Allocative efficiency is not possible in either industry.
D)Allocative efficiency will be achieved in the monopolized,but not the competitive industry.
E)It is not possible to make this comparison because firms in a competitive industry operate only in the short run.

Question

Quizplus · Accepted Answer

In a competitive industry, resources will be allocated efficiently in the long run because firms will produce at the lowest possible cost and charge the market price determined by supply and demand. In contrast, in a monopolized industry with a single price, the monopolist will not produce at the lowest possible cost but rather restrict output to maximize profits, resulting in a higher price and lower quantity than the socially optimal level. Therefore, allocative efficiency will not be achieved in the monopolized industry.

Choose the Statement That Best Compares the Long-Run Equilibrium of a Competitive