Compared to the productive efficiency of a perfectly competitive firm, a monopolist tends to be
A)very efficient because it charges a higher price
B)more efficient because it produces greater output
C)inefficient
D)equally efficient, as it also produces where MR = MC
E)very efficient because it conserves resources by producing less output

Question

Quizplus · Accepted Answer

A monopolist tends to be inefficient because it produces at a lower output level than a perfectly competitive firm, which leads to higher prices and lower consumer surplus. The monopolist may also not produce at the minimum point of the average cost curve, leading to higher costs and lower efficiency.

Compared to the Productive Efficiency of a Perfectly Competitive Firm