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.

Economics

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Pension funds ________

A) acquire access to funds by accepting deposits then using these monies to lend to households and firms B) raise funds by selling commercial paper then lend these funds to consumers C) are a special type of mutual fund D) acquire access to monies through the payment of premiums by employees

Economics

The years after 1960 witnessed some social and economic changes of extraordinary magnitude, including all of the following except

(a) The core of U.S. growth shifted away from its historic base in heavy industry. (b) A huge influx of women into the labor force occurred. (c) Legislation provided for greater safety on the job and cleaner air and water. (d) The Cold War ended in the early 1970s, following the end of the Vietnam War, and defense spending declined significantly from the Cold War years of the 1950s.

Economics

The key difference between supply in the short run and supply in the long run is that we assume that firms:

A. are able to enter and exit the market in the short run. B. are able to enter and exit the market in the long run. C. will not collude in the short run. D. will have a total supply that is constant in the long run.

Economics

When sellers have more information about hidden characteristics of a good than buyers have, more low-quality units are likely to be sold than high-quality units. This is

a. the law of diminishing marginal returns b. the law of natural selection c. the winner's curse d. the lemons problem e. the problem of common pools

Economics