PRC-3 · Chapter 12 · Question 62 of 69
Because monopolies face zero competition, their management often becomes complacent, wasting money on unnecessary expenses and failing to minimize costs. This specific type of inefficiency is termed:
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) X-inefficiency
Explanation
X-inefficiency occurs when a firm lacks the competitive pressure to control its costs, resulting in organizational slack and average costs that are higher than technologically necessary.
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