Because of their large-scale level of production, pure monopolists overallocate resources to their industry by producing beyond the P = MC output.

Question

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In a monopoly, the monopolist produces where marginal cost (MC) equals marginal revenue (MR), not where price (P) equals MC. This typically results in underallocation of resources compared to a perfectly competitive market, where P = MC.

Because of Their Large-Scale Level of Production, Pure Monopolists Overallocate