The monopoly and perfectly competitive firm are allocatively efficient.Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer.aTruebFalse
Question
The monopoly and perfectly competitive firm are allocatively efficient.Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer.aTruebFalse
Solution 1
bFalse
Explanation: Only perfectly competitive firms are allocatively efficient because they produce at a point where price equals marginal cost (P=MC), which is the condition for allocative efficiency. Monopolies, on the other hand, do not produce at the point where P=MC. Instead, they produce at a point where marginal cost equals marginal revenue (MC=MR) and charge a price that is higher than the marginal cost. Therefore, monopolies are not allocatively efficient.
Solution 2
bFalse
Explanation:
In economics, a firm is said to be allocatively efficient when it produces at a level where price equals marginal cost (P=MC). This is only consistently true for firms in perfect competition.
In a perfectly competitive market, firms are price takers and have no market power. They produce at a level where price equals marginal cost, which is the condition for allocative efficiency.
On the other hand, a monopoly has significant market power and can influence the price of its product. A monopoly maximizes its profit by producing at a level where marginal cost equals marginal revenue (MC=MR), not where price equals marginal cost. Therefore, a monopoly is not allocatively efficient.
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