Monopoly Is Allocatively Inefficient Because

question 66

Multiple Choice

Monopoly is allocatively inefficient because

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

---

Definitions:

Inventory

The total amount of goods and materials held in stock by a business, warehouse, or store.

Gross Domestic Product

Gross Domestic Product (GDP) is the total monetary or market value of all the finished goods and services produced within a country's borders in a specific time period.

Demand

The quantity of a good or service that consumers are willing and able to purchase at various prices during a certain period of time.

Leakage

Any diversion of income from the domestic spending stream; includes saving, taxes, and imports.