Allocative inefficiency due to unregulated monopoly is characterized by the condition:

Question

Quizplus · Accepted Answer

Allocative efficiency is achieved when price (P) is equal to marginal cost (MC). However, in the case of an unregulated monopoly, the monopolist has the ability to increase price above the marginal cost level. Therefore, the condition is P > MC, which represents allocative inefficiency. Choice C is the only option that reflects this condition.

Allocative Inefficiency Due to Unregulated Monopoly Is Characterized by the Condition