Which of the following statements is a major criticism of a pure monopoly as a source of allocative inefficiency?
A. A pure monopoly fails to expand output to the level where the price of an additional unit is just equal to its marginal cost.
B. A pure monopoly will always generate economic profit, and that means that prices are too high.
C. A pure monopoly has an unfair advantage because it can purchase labor at a lower price than perfectly competitive firms can.
D. A pure monopoly has no incentive to produce efficiently, because even the inefficient pure monopoly can be assured of economic profits.
Answer: A
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