A monopoly is an inefficient way to produce a product because
A)it can earn both short-run and long-run profits.
B)it faces a downward-sloping demand curve.
C)the cost to the monopolist of producing one more unit exceeds the value of that unit to potential buyers.
D)it produces a smaller level of output than would be produced in a competitive market.

Question

Quizplus · Accepted Answer

A monopoly produces a smaller level of output than would be produced in a competitive market, leading to an inefficient allocation of resources. This is because the monopolist restricts output to increase prices and profits, which reduces consumer surplus and total welfare in the market. Additionally, the monopolist may not face enough competitive pressure to innovate or produce at the lowest possible cost, leading to higher prices and less efficient production.

A Monopoly Is an Inefficient Way to Produce a Product