Explain why X-inefficiency is likely to be more prevalent in an industry in which firms have market power
What will be an ideal response?
The assumed goal of firms is to maximize profits, i.e., the difference between total revenues and total costs. X-inefficiency refers to the situation in which firms have fewer incentives to minimize the costs of production.When there is less competition, there is not as much downward pressure on price and, therefore, total revenues. As such, there is less pressure on the firm to minimize costs to maintain a particular level of profit.
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Other things remaining the same, an increase in the price level
A) decreases the quantity of real GDP supplied. B) decreases aggregate supply. C) increases aggregate supply. D) increases the quantity of real GDP supplied. E) neither changes aggregate supply nor changes the quantity of real GDP supplied.
In more modern times as opposed to the times of Malthus, higher standards of living appear to
A) decrease death rates and increase birth rates. B) decrease death rates and also decrease birth rates. C) decrease death rates and have no effect on birth rates. D) have had effects on neither death rates nor birth rates.