A single price profit maximizing monopolist is inefficient because
A)It produces too much output
B)It perfectly price discriminates when it can
C)The sum of consumer and producer surplus is less than it could be
D)It produces where price equals marginal cost rather than where marginal cost equals marginal revenue

Question

Quizplus · Accepted Answer

A monopolist produces at a quantity where MR=MC, which is a lower quantity and higher price than in a competitive market. As a result, the monopolist restricts output, creating a deadweight loss (reduction in consumer surplus and producer surplus), and preventing some mutually beneficial trades. Therefore, the sum of consumer and producer surplus is less than it could be under perfect competition.

A Single Price Profit Maximizing Monopolist Is Inefficient Because