In principle,a comparison of the long- run equilibrium of competitive and (single- price)monopoly industries leads to the following conclusion:
A)neither industry is capable of allocative efficiency.
B)both the competitive industry and the monopoly will allocate resources efficiently.
C)the competitive industry will achieve productive efficiency but the monopoly will not.
D)the competitive industry is consistent with allocative efficiency whereas the monopoly is not.
E)both the competitive industry and the monopoly will allocate resources inefficiently.

Question

Quizplus · Accepted Answer

In a competitive industry, the equilibrium price and quantity will be determined by market forces, leading to allocative efficiency where resources are allocated to their most valued use. On the other hand, in a monopoly industry where the firm has market power, the equilibrium price and quantity will not be allocatively efficient as they will produce less than the socially optimal level of output and charge a higher price. Therefore, choice D is the correct answer.

In Principle,a Comparison of the Long- Run Equilibrium of Competitive