The figure below shows the cost and revenue curves for a monopolist. The output level that is most likely to achieve allocative efficiency in this market is _____.
Figure 9.6

A)700 units
B)810 units
C)884 units
D)976 units
E)1,000 units

Question

The figure below shows the cost and revenue curves for a monopolist. The output level that is most likely to achieve allocative efficiency in this market is _____.​ ​
Figure 9.6
​

A)700 units 
B)810 units 
C)884 units 
D)976 units 
E)1,000 units

Quizplus · Accepted Answer

Allocative efficiency occurs where marginal cost equals marginal revenue, which is shown by the intersection of the marginal cost and marginal revenue curves. In this case, the intersection occurs at an output level of approximately 884 units. At this point, the monopolist is producing the quantity at which the marginal benefit to society is equal to the marginal cost of production, resulting in the efficient allocation of resources.

The Figure Below Shows the Cost and Revenue Curves for a Monopolist