Consider a market in which a firm has monopoly power. suppose in addition that the firm produces under the presence of either a positive or a negative externality. does the externality necessarily lead to a greater misallocation of resources? a. no. in the presence of a negative externality, since the monopolist produces less than the competitive quantity, it may end up producing the socially efficient quantity. however, in the case of a positive externality, since a competitive market produces too little, a monopolist will only exacerbate the problem. b. yes. in the presence of a negative externality, since the monopolist produces more than the competitive quantity, it will make the negative externality worse. and in the case of a positive externality, the monopolist will exploit its monopoly power and produce even less than a competitive market, thus exacerbating the problem. c. no. given a market with monopoly power is already inefficient, the concept of a positive or negative externality does not apply. d. yes. an externality presents an opportunity for a firm to exploit the situation to earn positive economic profits. in the case of a firm with monopoly power, this ability to exploit the situation is even greater and therefore the externality leads to a greater misallocation of resources.