If a perfectly competitive firm and a single-price monopolist face the same demand and cost curves, then
A)the competitive firm will attain resource-allocative efficiency, but the monopolist will not.
B)the competitive firm will attain resource-allocative efficiency, but the monopolist may or may not, depending upon the demand for its product.
C)the competitive firm will not attain resource-allocative efficiency, but the monopolist will.
D)both the competitive firm and the monopolist will attain resource-allocative efficiency.
E)neither the competitive firm nor the monopolist will attain resource-allocative efficiency.

Question

Quizplus · Accepted Answer

In a perfectly competitive market, firms achieve resource-allocative efficiency because they produce at a point where price equals marginal cost (P=MC), which is the condition for allocative efficiency. A single-price monopolist, however, does not achieve allocative efficiency because it sets a price above marginal cost (P>MC) to maximize profits, leading to underproduction compared to the socially optimal level.

If a Perfectly Competitive Firm and a Single-Price Monopolist Face