In monopoly:
A) because P MC, a basic condition for efficiency is violated.
B) consumers are confronted with a price that is lower than marginal cost.
C) consumers will consume more of the good than is economically efficient.
D) all of the above are true.

Question

In monopoly:
A) because P > MC, a basic condition for efficiency is violated.
B) consumers are confronted with a price that is lower than marginal cost.
C) consumers will consume more of the good than is economically efficient.
D) all of the above are true.

Quizplus · Accepted Answer

Monopoly results in a price that is set higher than the marginal cost (MC), which violates the condition for allocative efficiency where price should be equal to MC. Therefore, choice A is true. Choices B and C are incorrect as consumers face a price that is higher than MC and may consume less than economically efficient levels due to the higher price.

In Monopoly