In which one of the following market models is X-inefficiency most likely to be the greatest?

Question

Quizplus · Accepted Answer

X-inefficiency arises when a firm operates at a higher cost than necessary, without any corresponding benefit to consumers. This is more likely to occur in a pure monopoly, where there is no competition to incentivize the firm to minimize costs and maximize efficiency. In a perfectly competitive market, firms are forced to operate at maximum efficiency to stay competitive, reducing the likelihood of X-inefficiency. Oligopolies and monopolistically competitive markets may have some degree of competition, which can mitigate X-inefficiency, but not to the same extent as in a perfectly competitive market.

In Which One of the Following Market Models Is X-Inefficiency