Answer : Resources are not used efficiently in a monopolist's world because the market is not in equilibrium. Natural monopolies can happen in markets in which production costs decrease a lot as output increases (economies of scale).

Why is a monopoly efficient?

Advantages of monopoly

If there are significant economies of scale, a monopoly can benefit from lower average costs. This can lead to lower prices for consumers. ... Therefore, for natural monopolies and industries with significant economies of scale, monopolies can be more efficient.

How does monopoly cause misallocation of resources?

Since the monopoly firm has excess capacity, there is under allocation of resources to the monopoly firm and misallocation of resources in the economy. ... This is because the output under monopoly is smaller and the price is higher than under perfect competition.