Question

X-inefficiency is said to occur when a monopolist's: A) Costs are minimized B) Costs are higher than they should be C) Revenues are maximized D) Profits are reduced

Answer 1

Explanation:

B) Costs are higher than they should be

X-inefficiency occurs when a monopolist's costs are higher than they should be. In a monopoly, the absence of competition can lead to a lack of incentives for the monopolist to minimize costs or operate efficiently, resulting in higher costs compared to a more competitive market. This inefficiency can lead to higher prices for consumers and reduced economic welfare.