Monopoly Power Results from the Ability To

question 64

Multiple Choice

Monopoly power results from the ability to:

• A) set price equal to marginal cost.
• B) equate marginal cost to marginal revenue.
• C) set price above average variable cost.
• D) set price above marginal cost.

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Definitions:

Average Total Cost

The cost per unit is calculated by dividing the overall production cost by the quantity of units produced.

Average Variable Cost

The total variable cost divided by the quantity of output produced; it shows the variable cost per unit of output.

Increasing Returns to Scale

A situation in production where doubling the inputs results in more than doubling the output, leading to efficiencies and economies of scale.

Decreasing Returns to Scale

A situation in which a firm experiences a less than proportional increase in output despite a proportional increase in all inputs, typically due to inefficiencies.