Th3.4: ^^ Efficiency Flashcards
1
Q
What kind of efficiency is a monopoly?
A
productively inefficient, since they don’t produce at MC = AC
also not allocative efficient as P>MC
2
Q
Why will a monopolist be dynamically efficient?
A
since a monopolist is likely to make supernormal profits
3
Q
However, if there is no competition…
A
monopolists may have no incentive to invest
