Why is a monopoly inefficient?
What will be an ideal response?
A monopoly is inefficient because it produces such that price is greater than marginal cost. To achieve maximum economic profits, the monopolist restricts output and raises price. When price is greater than the opportunity cost to society of producing the last unit, the allocation of resources is inefficient. Society would prefer more resources were allocated into production of the good produced by the monopolist.
You might also like to view...
To measure the "core" inflation rate, the Bureau of Economic Analysis uses a price measure that
A. excludes food and energy prices because the prices of these items can be volatile. B. includes food and energy prices because the se items account for a significant portion of the typical consumer's expenditures. C. is made up of a fixed basket that includes durable goods, non-durable goods, and services. D. includes prices for different components of gross private domestic investment, government spending, and personal consumption expenditures.
Suppose the Economics Department has a graduation party for its students but as a final test they must show they have learned something about trade. The men are given food when they walk in and the women are given drink. Suppose they have very different preferences where food and drink provide utility. For men U = F?D? . For women U=min(F,D) The contract curve in the Edgeworth box using a
representative man and woman would be a. a right angle connecting the lower left corner with the upper right corner. b. a curve (not necessarily a line) connecting the lower left corner with the upper right corner. c. a line connecting the lower left corner with the upper right corner. d. a right angle connecting the upper left corner with the lower right corner.