more units.

The monopolist will select the profit-maximizing level of output where MR = MC, and then charge the price for

that quantity of output as determined by the market demand curve. If that price is above average cost, the

monopolist earns positive profits.

Monopolists are not productively efficient, because they do not produce at the minimum of the average cost

curve. Monopolists are not allocatively efficient, because they do not produce at the quantity where P = MC. As

a result, monopolists produce less, at a higher average cost, and charge a higher price than would a

combination of firms in a perfectly competitive industry. Monopolists also may lack incentives for innovation,

Access for free at openstax.org
9 • Self-Check Questions 233

because they need not fear entry.

Self-Check Questions

1. Classify the following as a government-enforced barrier to entry, a barrier to entry that is not government-
{"source": "downloads\\business\\economics\\Microeconomics3e.pdf", "total_pages": 597, "moddate": "2022-12-07T14:23:05-06:00", "uploaded_via": "batch_uploader", "batch_upload": true, "file_size_mb": 26.99, "file_name": "Microeconomics3e.pdf", "file_hash": "830b81f41611ac67a490444dbb5d6aed292224606965b06965b914443c93331a", "upload_timestamp": "2026-02-07T15:37:44.339247", "producer": "Prince 14.2 (www.princexml.com)", "creator": "PDFMiner", "creationdate": "2022-12-07T14:15:44-06:00", "title": "Principles of Microeconomics 3e", "file_type": ".pdf", "source_file": "downloads\\business\\economics\\Microeconomics3e.pdf"}