Monopoly+is+Not+Productively+Efficient

Monopoly Is Not Productively Efficient

Monopolies do not sell at the price where MR=MC but rather take the price equivant on the demand curve, which causes charging higher prices. This causes a bigger producer surplus because monopolies get rid of surplus and also take it from consumers. Monopolies are not prodctively efficient because of X-inefficiency, where companies operating in a monopoly have less of an incentive to maximise profits due to lack of competition. However, due to economies of scale it can become possible for monopolistic companies to produce at MC=MR with a lower price to the consumer than perfectly competitive companies producing at MC=AC. Monopolies also don't produce at the bottom of the ATC curve which makes a company both productively and allocatively efficient.


 * inefficient** because P > MC

Question: What's a reason that monopolies are productively inefficient? Answer: (ex.) X-inefficiency

Helpful Links: http://en.wikipedia.org/wiki/Productive_efficiency http://en.wikipedia.org/wiki/Monopoly http://en.wikipedia.org/wiki/Production_possibility_frontier