Monopoly yields neither **productive efficiency** nor **allocative efficiency**.

### Explanation:
In a monopolistic market structure, a single seller dominates the market, which leads to various inefficiencies. Productive efficiency occurs when goods are produced at the lowest possible cost. In contrast, allocative efficiency is achieved when resources are distributed in a way that maximizes consumer satisfaction, specifically when price equals marginal cost (P = MC).

However, in a monopoly, the firm has market power and can set prices above marginal cost, leading to a deadweight loss in the economy. This results in a situation where not all consumer demand is met, implying that some consumers are willing to pay prices higher than the marginal cost of production but cannot buy the product, hence leading to a loss of welfare.

Moreover, monopolies may not produce at the lowest cost due to lack of competition, leading to less incentive to innovate or minimize costs. Thus, a monopoly creates inefficiencies that prevent achieving both productive and allocative efficiency in the market.

Question

Monopoly yields neither **productive efficiency** nor **allocative efficiency**.

### Explanation:
In a monopolistic market structure, a single seller dominates the market, which leads to various inefficiencies. Productive efficiency occurs when goods are produced at the lowest possible cost. In contrast, allocative efficiency is achieved when resources are distributed in a way that maximizes consumer satisfaction, specifically when price equals marginal cost (P = MC).

However, in a monopoly, the firm has market power and can set prices above marginal cost, leading to a deadweight loss in the economy. This results in a situation where not all consumer demand is met, implying that some consumers are willing to pay prices higher than the marginal cost of production but cannot buy the product, hence leading to a loss of welfare.

Moreover, monopolies may not produce at the lowest cost due to lack of competition, leading to less incentive to innovate or minimize costs. Thus, a monopoly creates inefficiencies that prevent achieving both productive and allocative efficiency in the market.

Knowee AI · Accepted Answer

Monopoly yields neither **productive efficiency** nor **allocative efficiency**.

### Explanation:
In a monopolistic market structure, a single seller dominates the market, which leads to various inefficiencies. Productive efficiency occurs when goods are produced at the lowest possible cost. In contrast, allocative efficiency is achieved when resources are distributed in a way that maximizes consumer satisfaction, specifically when price equals marginal cost (P = MC).

However, in a monopoly, the firm has market power and can set prices above marginal cost, leading to a deadweight loss in the economy. This results in a situation where not all consumer demand is met, implying that some consumers are willing to pay prices higher than the marginal cost of production but cannot buy the product, hence leading to a loss of welfare.

Moreover, monopolies may not produce at the lowest cost due to lack of competition, leading to less incentive to innovate or minimize costs. Thus, a monopoly creates inefficiencies that prevent achieving both productive and allocative efficiency in the market.

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