An important economic problem associated with pure monopoly is that, at the profit-maximizing outputs, resources are
A) overallocated because price exceeds marginal cost.
B) overallocated because marginal cost exceeds price.
C) underallocated because price exceeds marginal cost.
D) underallocated because marginal cost exceeds price.

Question

Quizplus · Accepted Answer

In a pure monopoly, the price is set above marginal cost, leading to underallocation of resources as the monopolist produces less than the socially optimal output level.

An Important Economic Problem Associated with Pure Monopoly Is That