A monopoly misallocates resources when it
A) restricts output so that the marginal benefit of the last unit sold exceeds the marginal social cost of producing the good.
B) makes an above-normal profit.
C) sells the same product to different groups of customers at different prices.
D) exploits scale economies.

Question

Quizplus · Accepted Answer

A monopoly misallocates resources when it restricts output to the point where the marginal benefit of the last unit sold is greater than the marginal social cost of producing that unit. This leads to a deadweight loss, where potential gains from trade are not realized due to the monopolistic market power. The other choices (B, C, and D) are characteristics or outcomes of a monopoly, but do not necessarily result in resource misallocation.

A Monopoly Misallocates Resources When It