Monopoly Is Allocatively Inefficient Because

question 100

Multiple Choice

Monopoly is allocatively inefficient because

• A) the price exceeds the marginal cost of the last unit produced.
• B) the firm has no incentive to maximize profits.
• C) the opportunity cost exceeds the marginal cost of the last unit produced.
• D) the marginal cost exceeds the average cost for the last unit produced.
• E) lower costs could be achieved.

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Definitions:

Comparative Advantage

The ability of a country or entity to produce a specific good or service at a lower opportunity cost than others, leading to specialization in trade.

Tires

Rubber-based components that fit around the rims of wheels to provide vehicles with traction, support, and a cushion from the impact of the road.

Microchips

Small semiconductor devices containing electrical circuits that can perform calculations or store data.

Producer Surplus

The difference between what producers are willing to accept for a good or service versus what they actually receive.