Answer to Question #51676 in Microeconomics for chantizo

Question #51676
explain why monopolies are economically inefficient?
1
Expert's answer
2015-03-31T10:43:17-0400
In a monopoly the market product price is exceeding the marginal cost of production, which indicates inefficient resource allocation. Monopoly output is less than a competitive output, and monopoly’s average long-term costs exceed the minimal costs. This indicates a lower efficiency of the resource use. Monopoly leads to a reduction in social welfare, because of the high prices and a little output of its production.

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