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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Which of the following will make price discrimination difficult for a monopolist?

A) the possibility of resale of the product B) a constant marginal cost curve C) an increasing marginal cost D) a downward sloping demand curve

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The narrowest definition of money:

A. includes the things that can be used in transactions immediately. B. contains only cash and bank reserves held at the Fed. C. is referred to as hard money. D. All of these are true.

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There may be a different criterion used for the long run, but for the short run, a firm should shut down production if price is less than

a. ATC b. AR c. MC d. AVC e. AFC

Economics