Which of the Following Is a Major Criticism of a Monopoly

question 139

Multiple Choice

Which of the following is a major criticism of a monopoly as a cause of allocative inefficiency?

• A)A monopolist fails to expand output to the level where the consumers' evaluation of an additional unit is just equal to its opportunity cost
• B)A monopolist has no incentive to produce efficiently, because even if it pays no attention to the costs of production, it will be guaranteed an economic profit
• C)A monopolist will always make profits therefore providing an incentive to keep prices at the level that maximizes consumer surplus
• D)A monopolist has an advantage because it can purchase the resources in a competitive market
• E)Consumer surplus would no longer be equal to producer surplus

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Definitions:

Operating Expenses

Costs incurred during the normal operations of a business, excluding the cost of goods sold.

Sales

The transactions involving the exchange of goods or services for money, constituting the primary revenue source for most businesses.

Sales Discount

A reduction in the price of goods or services offered by a seller to a buyer, often to incentivize the purchase or prompt payment.

Merchandise

Goods or products that are bought and sold in business transactions.