12.7k views
1 vote
A monopoly is an inefficient way to produce a product because

User Lorell
by
8.8k points

1 Answer

6 votes

Answer:

The output produced is less than the socially optimal level.

Step-by-step explanation:

A monopoly market has a single producer selling a product with no close substitutes. The firm is a price maker and has a downward-sloping curve. The firm is able to maximize profits by producing at the level where the marginal revenue is the marginal cost.

In perfect competition, the profit-maximizing level of output is where the marginal cost is equal to price. This output level is a socially optimal level.

The monopoly output is less than the socially optimal level of output that is why it is inefficient.

User Abhilash Thomas
by
8.5k points