At its profit-maximizing output, a pure nondiscriminating monopolist achieves
A) neither productive efficiency nor allocative efficiency.
B) both productive efficiency and allocative efficiency.
C) productive efficiency but not allocative efficiency.
D) allocative efficiency but not productive efficiency.

Question

Quizplus · Accepted Answer

At its profit-maximizing output, a pure nondiscriminating monopolist achieves neither productive efficiency nor allocative efficiency. Productive efficiency refers to producing a good at the lowest cost possible while allocative efficiency refers to producing the optimal quantity that maximizes social welfare. A monopolist, by definition, restricts output to increase prices and profits, which leads to a deadweight loss and inefficiency in the market. Therefore, a monopolist cannot achieve either productive efficiency or allocative efficiency.

At Its Profit-Maximizing Output, a Pure Nondiscriminating Monopolist Achieves