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In the long-run a monopoly does not achieve the type of economic efficacy seen in perfect...

In the long-run a monopoly does not achieve the type of economic efficacy seen in perfect competition. Briefly explain the implication for efficiency.

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Production is efficient when a firm produces at lowest possible average total cost (ATC), and allocation is efficient when a price equal to the firm's marginal cost (MC) is charged. In the long run, a perfect competitor charges a price that equals to MC (ensuring allocative efficiency) and equal to minimum ATC (ensuring productive efficiency). But a monopolist, being the single seller, charges a price higher than MC by equating marginal revenue (MR) equal to MC. The corresponding price is higher than MC, and ATC is not necessarily minimized at this output level. Therefore, efficiency is not maximized and a social inefficiency loss arises from monopoly.

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